‘Domestic, external headwinds to persist, drag growth to 6.4%’

New Delhi: The raft of measures announced by the government to boost the sagging economic growth will provide some support to investor and business sentiments, but domestic and external headwinds will continue to persist through the year, resulting in a 6.4% GDP growth, Moody's Investors Service said.

Commenting on the measures announced by Finance Minister Nirmala Sitharaman last week, William Foster, Vice President, Sovereign Risk Group, Moody's Investors Service said GDP growth rate will pick up next fiscal year to 6.8%.

The measures announced, including an offer of tax incentives and some reforms across a variety of sectors, were an effort to stimulate slowing economic growth, he said.

"We expect the measures to provide some support to investor and business sentiment, and the acceleration of the capitalization of public sector banks to help improve the provision of credit and transmission of monetary policy easing," he said.

"However, we also expect domestic and external headwinds to persist over the course of the year, resulting in 6.4% real GDP growth in the fiscal year ending in March 2020, before growth picks up to 6.8% next year."

Moody's had last year lowered India's GDP growth forecast for the 2019 calendar year to 6.2% from the previous forecast of 6.8%.

India's economic growth momentum has been slipping since the last 3-4 quarters. Not only did GDP growth fall to a 20-quarter low of 5.8% in January-March, leading indicators point towards further weakening of growth momentum to about 5.5% in Q1 (April-June) 2019-20, said Shubhada Rao, Chief Economist, Yes Bank.

"While there is some degree of inevitability in the current phase of domestic growth slowdown on account of weakening of global growth impulses, the impact appears to have been accentuated by few domestic factors," Rao said.

While the telltale signs of distress emanated from the rural part of the economy, sectors like NBFCs, automobile, real estate, and FMCG had started to come under pressure.

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