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"Fundamentals Remain Quite Robust": Government As Moody's Lowers Outlook

The Finance Ministry said the fundamentals of the economy remain quite robust with inflation under check and bond yields low.

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'Fundamentals Remain Quite Robust': Government As Moody's Lowers Outlook

India's GDP or gross domestic product expanded 5% in April-June - its slowest pace of growth since 2013

Credit ratings agency Moody's on Thursday changed its outlook on India's ratings to "negative" from "stable", citing increasing risks that the country's economic growth will remain lower than in the past. The ratings agency had earlier lowered its growth forecast for India as the economy, amid low demand, registered its worst pace of expansion in more than six years. The government, however, said India continues to be among the fastest growing major economies in the world and the country's "relative standing remains unaffected". "As India's potential growth rate remains unchanged, assessment by IMF and other multilateral organisations continues to underline a positive outlook on India," said the finance ministry.
Here are 10 things to know about this big story:
  1. The outlook partly reflects government and policy ineffectiveness in addressing economic weakness, which led to an increase in debt burden from already high levels, Moody's said. 
  2. The agency estimates that the country's growth slowdown is in part long-lasting while backing its other ratings for India.
  3. In an official statement on Friday, the finance ministry said the "fundamentals of the economy remain quite robust with inflation under check and bond yields low. India continues to offer strong prospects of growth in near and medium term."
  4. It also said the government has undertaken a series of financial sector and other reforms to strengthen the economy as a whole and proactively taken policy decisions in response to the global slowdown. These measures would lead to a positive outlook on India and would attract capital flows and stimulate investments, the ministry said.
  5. The government has over the past few months made a range of decisions to push demand and revive growth, from withdrawal of higher taxes on foreign investors as announced in Budget to a mega consolidation plan for state-run banks to reduction in corporate tax.
  6. After the corporate tax cuts and lower nominal GDP growth, Moody's now expects a government deficit of 3.7 per cent of GDP in the fiscal year ending in March 2020, compared with a government target of 3.3 per cent.
  7. The agency last month lowered its growth forecast for India to 5.8 per cent in financial year 2019-20 from 6.2 per cent, saying a weaker growth outlook would dampen the prospects for fiscal consolidation.
  8. India's GDP or gross domestic product expanded 5 per cent in April-June - its slowest pace of growth recorded since 2013 - as consumer demand and government spending slowed amid global trade frictions.
  9. Last month, the International Monetary Fund (IMF) lowered its growth forecast for the economy, which still projected India to retain its rank as the world's fastest-growing major economy, tying with China. 
  10. Meanwhile, the Reserve Bank of India (RBI) in the same month lowered its growth projection for the economy to 6.1 per cent in the year ending March 2020. 




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Highlights

1
Moody's mentions increasing risks that India's growth will remain lower
2
India among fastest growing major economies, says government
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Last month, Moody's slashed India growth forecast to 5.8% for 2019-20

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