Moody's downgrades GDP growth rate

New Delhi: Moody's Investors Service on Friday revised downwards India's GDP growth forecast for the current year to 6.2 per cent, saying the economy remains sluggish due to a combination of factors such as weak hiring, distress among rural households and tighter financial conditions.

The GDP growth forecast for 2019 calendar year was revised downwards from its previous estimation of 6.8 per cent. The same for 2020 was also lowered by a similar 0.6 percentage points to 6.7 per cent, Moody's said in a statement.

Announcing revision in its growth forecast for 16 Asian economies, it said weaker trade and investment weigh on GDP growth, despite stable private and public consumption in the region.

"While not heavily exposed to external pressures, India's economy remains sluggish on account of a combination of factors, including weak hiring, financial distress among rural households, and tighter financing conditions due to stress among non-bank financial institutions," it said.

Stating that domestic factors have had a greater influence on growth in India, Moody's said the moderation in business sentiment and slow flow of credit to corporates have contributed to weaker investment in the country. "Cooler business sentiment and slow flow of credit to corporates contribute to weaker investment in India," it said.

Indian economy had expanded by 6.9 per cent in 2017 and 7.4 per cent in 2018, according to Moody's. GDP growth rate had hit a five-year low of 5.8 per cent in the January-March quarter and the government is slated to announce the first quarter (April-June) growth number on August 30.

The Reserve Bank of India (RBI) too had earlier this month lowered GDP growth estimate for the current fiscal that began on April 1 to 6.9 per cent from previous estimate of 7 per cent citing demand and investment slowdown.

Moody's said inflation was expected to rise to 3.7 per cent this year and 4.5 per cent in the next from 2.9 per cent in 2018.