Moody’s lowers India’s growth forecast to 5.5 %

12 years ago | Posted in: Business | 652 Views

In yet another projection scale-down, Moody’s has revised its estimate on India’s economic growth lower at 5.5 per cent during 2012 and cited the “turbulent” global conditions, domestic policy “mis-steps” and a poor monsoon as the reasons weighing on investor confidence and demand.

Pegging its growth forecast at sub-6 per cent in view of the deterioration in the overall economic environment at home and abroad, Moody’s Analytics said that India’s GDP (gross domestic product) growth rate is likely to be 5.5 per cent this year, while it is expected to be 6 per cent in 2013, marking a downward adjustment from 6.2 per cent estimated earlier.

“There has been little policy response from either the Reserve Bank of India or the government and with global uncertainty dragging on, we see nothing on the horizon to lift the economy from its funk,” Moody’s Analytics Senior Economist Glenn Levine said.

Incidentally, the downward revision by Moody’s has come close on the heels of similar scale-down in growth projections by a few other major domestic and global financial services firms such as Citi and CLSA, which cut their estimates for India to 5.4 per cent and 5.5 per cent, respectively, for the fiscal year ending March next year.

Moody’s, in particular, appears to have based its outlook revision on the poor monsoon rainfall during the June-to-September period as it accounts for nearly 60 per cent of the annual precipitation.

Viewing this as the second major factor responsible for the lowering in growth forecast, Moody’s said that since the monsoon was running 20 per cent below long-term averages, it might cut agriculture output and rural incomes, with knock-on effects for consumer demand and food prices, which would reaccelerate from early 2013.

Moreover, while gross domestic product growth during the first quarter was the slowest in nine years, Moody’s noted that the second quarter is likely to witness a similar fate as there is no indication of an upturn till at least the December quarter and possibly later. In such a scenario, confidence among Indian firms has been crushed by weak demand, elevated interest rates, high inflation, and most significantly, the instability created by a weak Central government that has badly lost its way.

In a harsh comment on governance, Moody’s maintained that India’s Central Government is the single biggest factor weighing on business confidence and the economic outlook and advocated that Prime Minister Manmohan Singh should turn around quickly or risk becoming a “lame duck” for the remainder of his term.

 

 

ref: www.thehindu.com

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