Moody’s Investors Service sees India’s gross domestic product (GDP) growth falling to 5.8% in the fiscal year ending in March 2020 (fiscal 2019) from 6.8% in fiscal 2018.
The forecast is significantly lower than Reserve Bank of India’s (RBI) revised projection of 6.1% for FY20.
The rating agency expects growth to pick up to 6.6% in fiscal 2020 and around 7.0% over the medium term.
What was an investment-led slowdown has broadened into consumption, driven by financial stress among rural households and weak job creation. A credit crunch among non-bank financial institutions (NBFIs), major providers of retail loans in recent years, has compounded the problem.
Prolonged softer growth would dampen prospects for the government’s fiscal consolidation plans and hamper its ability to prevent a rise in the debt burden. Given India’s already weak fiscal position, this would weigh on the sovereign credit profile.