On Thursday, Moody’s Investor Service has lowered India’s rating from ‘stable’ to ‘negative’ in view of growing concerns over an economic slowdown and the size of the debt. Moody’s says that the growth rate will be less than before.
Given corporate tax cuts and the slow pace of GDP growth, Moody’s estimates the budget deficit to be 3.7% of GDP for the fiscal year ending March 2020, with a target of 3.3%. In October 2019, Moody’s reduced its GDP growth estimate to 5.8% in 2019-20, before Moody’s had previously released its estimate of 6.2%.
Moody downgrade India’s rating to negative
The agency said in a statement, “Moody’s has reduced the rating given the risks associated with the growth of the Indian economy.” It is clear that the economy will move at a slower pace than before, mainly due to less effective government policies. Moody’s estimates that the debt burden may increase gradually.
According to Moody’s, the steps taken by the government should a positive impact on the economy and the duration and depth of lethargy should reduce. Due to a prolonged economic crisis, fewer new employment opportunities. The NBFC finance crisis, rural households are likely to live longer.
Moody’s continued, “The scope for further reforms and broadening the tax base to increase investment. Also, growth in business greatly reduced.”
The Indian economy grew at a rate of 5.0% in the April to June quarter.
This rate was the lowest since 2013. This was due to weak demand and a lack of government spending. In view of this, the Reserve Bank has cut interest rates several times. However, the government has taken major steps like cutting the corporate tax.
Global agency Moody’s said the recent steps of the Indian government could prove helpful in reducing the duration. However, the depth of the growth slowdown. The agency further said that the NBFC not expected to recover from the crisis soon.