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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