Moody’s Investors Service report on Wednesday has cut India’s GDP growth forecast to 7.3 per cent in 2018, from previous forecast of 7.5 per cent due to higher oil prices and tighter financial conditions.
“The Indian economy is in cyclical recovery led by both investment and consumption. However, higher oil prices and tighter financial conditions will weigh on the pace of acceleration. We expect GDP growth of about 7.3 per cent in 2018, down from our previous forecast of 7.5 per cent,” the report said.
It, however, kept growth expectation for 2019 remains unchanged at 7.5 per cent.
Moody’s further said: “On the domestic front, growth should benefit from an acceleration in rural consumption, supported by higher minimum support prices and a normal monsoon. The private investment cycle will continue to make a gradual recovery, as twin balance-sheet issues — impaired assets at banks and corporates — slowly get addressed through deleveraging and the application of the Insolvency and Bankruptcy Code.”
It said ongoing transition to the new Goods and Service Tax regime could also weigh on growth somewhat over the next few quarters, which poses some downside risk to its forecast.
“However, we expect these issues to moderate over the course of the year,” it said.