Owing to the higher oil prices and tighter financial conditions, the international credit rating agency Moody’s Investors Service has cut down the GDP forecast of India to 7.3 in 2018 from the previous forecast of 7.5%.
Moody’s Report said that the Indian Economy was in cyclical recovery led by both investment and consumption and that however higher oil prices and tighter financial conditions would weigh on the pace of acceleration. The report said that Moody’s expected a GDP growth of about 7.3% in 2018, down from their previous forecast of 7.5%. The growth expectation for 2019 remains unchanged at 7.5%.
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Moody’s suggested an acceleration in rural consumption and support to the farmers by ensuring minimum support prices and a normal monsoon to accelerate the growth rate. They hoped that the private investment cycle would continue to make a gradual recovery as the twin balance sheet issues, that is, impaired assets at banks and corporates, got addressed slowly through deleveraging and the apt application of insolvency and bankruptcy code.
The ongoing transition to new GST regime might also impact the growth over next few quarters, which posed some downside risk to its forecast. Anyhow Moody’s expects a moderation of these issues over the course of the year.
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