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Moody’s also reduced India’s GDP growth forecast for 2019 to 5.6 percent

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Moody’s Investors Service has reduced India’s economic growth forecast for 2019 to 5.6 percent. Moody’s said in a report on Friday that the slow growth rate of employment is impacting consumption. They said that the growth rate will improve to 6.6 percent and 6.7 percent in 2020 and 2021 respectively. However, the growth rate will remain lower than before.

Moody’s said:

“We have reduced India’s gross domestic product (GDP) growth forecast for 2019 to 5.6 percent, down from 7.4 percent in 2018. India’s economic growth rate has slowed down since mid-2018 and real GDP growth has fallen from around eight percent to five percent in the second quarter of 2019 and fell to 4.5 percent in the September quarter. 

They further Explain that the Consumption demand has slowed down and slow growth in employment has impacted consumption. We expect growth to improve to 6.6 percent and 6.7 percent in 2020 and 2021.

The government’s measures like cutting corporate tax rates, recapitalizing banks, spending on infrastructure, supporting vehicles and other industries have not directly eradicated the problem of consumption demand.

The government has started a campaign to provide employment to the country, apart from this, the benefit of the policy rate cut by the Reserve Bank has not been extended to the consumers in a sufficient manner. Sales of commercial vehicles declined by 22.95 per cent in the first six months of FY 2019-20 due to economic slowdown and liquidity crisis in the financial sector.

It is noteworthy that the Reserve Bank has also lowered the country’s economic growth forecast from 6.1 percent to 5 percent last week citing soft demand and sluggish external demand. Apart from this, the International Monetary Fund has also estimated the country’s GDP growth rate from 7 percent to 6.1 percent. World Bank has also reduced its estimate to 6 percent.

Asian Development Bank (ADB) has also reduced India’s economic growth forecast for 2019-20 from 6.5 percent to 5.1 percent this week. DBS Banking Group, a Singapore-based financial services provider, has also lowered India’s economic growth forecast from 5.5 percent to 5 percent in the current financial year.

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