Moody's cuts India's growth forecast to 5.6%

After cutting India's sovereign ratings, Moody's Investor Services on Thursday cut India's growth forecast to 5.6 per cent, from its earlier 5.8 per cent due to subdued consumer demand, along with sluggish liquidity supply.

Accordingly, the ratings agency revised downwards its growth forecast for India to 5.6 per cent in 2019, from 7.4 per cent in 2018.

"We expect economic activity to pick up in 2020 and 2021 to 6.6 per cent and 6.7 per cent, respectively, but the pace to remain lower than in the recent past," the ratings agency said in Global Macro Outlook 2020-21.

"India's economic growth has decelerated since mid-2018, with real GDP growth slipping from nearly 8 per cent to 5 per cent in the second quarter of 2019 and joblessness rising."

In the current slowdown consumption demand has "cooled" notably, the ratings agency said.

Last week, Moody's had changed the outlook on the Government of India's sovereign ratings to negative from stable and affirmed the Baa2 foreign-currency and local currency long-term issuer ratings.

Moody's had also affirmed India's Baa2 local-currency senior unsecured rating and its P-2 other short-term local-currency rating.

India's credit rating at Baa2 is the second lowest investment rating and Moody's has warned that India could be heading for a debt trap and recessionary phase.IANS