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Indian Economy slowdown


Moody’s take on Indian economy
Highlights:
v  FY20 GDP Projection, lowered from 5.8% to 4.9%.
v  Key concerns:
§  Weakening consumption
§  Rural financial stress
§  Low job creation
§  Liquidity constraints
§  NBFC credit crunch has exacerbated slowdown
§  Steps to stimulate demand will be limited in offsetting slowdown
v  Measures unveiled by Government:
§  Income support for farmers
§  Monetary policy easing
§  Broad corporate tax cut
v  FY21 Projection:
§  Modest recovery expected
§  Growth will be weaker versus recent years
§  Weak demand, tight liquidity to constrain auto earnings
§  Slow growth will reduce debt servicing capabilities of households.

Other Economists take on economy slowdown:--
v  Market’s assumption true; Fiscal deficit way higher than Govt.’s claims.
v  Govt. roadmap for future Fiscal roadmap will be crucial.
v  Not seeing the favourable macros needed for yields to move.
v  There’s not much space on Monetary or Fiscal side.
v  Govt. needs to look at imaginative approaches.
v  Govt. could look at a passive approach which does not need much political capital.
Allow NBFC to go sour over a period of time. Banks takes that hit and Govt. recapitalizes the banks. This does not involve much political capital and Govt. most likely to take this passive approach.
v  Another approach is Bad bank approach.
v  Govt. and RBI’s first objective must be to break the cycle of low growth and bad loans.
v  Need to pinpoint specific reasons behind low growth to find a remedy.

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