Business
Global credit agency Moody's lowered India's growth forecast in 2018.
Updated : May 30, 2018, 05:36 PM IST
Global credit agency Moody's lowered India's growth forecast in 2018. Moody's on Wednesday slashed India's GDP growth forecast to 7.3 per cent in 2018, from previous forecast of 7.5 per cent due to higher oil prices and tighter financial conditions.
"The Indian economy is in cyclical recovery led by both investment and consumption. However, higher oil prices and tighter financial conditions will weigh on the pace of acceleration. We expect GDP growth of about 7.3 per cent in 2018, down from our previous forecast of 7.5 per cent," the report said.
"On the domestic front, growth should benefit from an acceleration in rural consumption, supported by higher minimum support prices and a normal monsoon. The private investment cycle will continue to make a gradual recovery, as twin balance-sheet issues -- impaired assets at banks and corporates -- slowly get addressed through deleveraging and the application of the Insolvency and Bankruptcy Code," Moody's added further.
Discussing about the new Goods and Service Tax regime, Moody`s said that it could weigh on growth somewhat over the next few quarters, which poses some downside risk to its forecast, adding "we expect these issues to moderate over the course of the year."
Last year in November, Moody's upgraded India's sovereign credit rating by a notch to 'Baa2' with a stable outlook citing improved growth prospects driven by economic and institutional reforms.
The rating upgrade comes after a gap of 13 years - Moody's had last upgraded India's rating to 'Baa3' in 2004.
In 2015, the rating outlook was changed to 'positive' from 'stable'.
The 'Baa3' rating was the lowest investment grade -- just a notch above 'junk' status.
"The decision to upgrade the ratings is underpinned by Moody's expectation that continued progress on economic and institutional reforms will, over time, enhance India's high growth potential and its large and stable financing base for government debt, and will likely contribute to a gradual decline in the general government debt burden over the medium term," Moody s said in a statement.