News:International rating agency Moody has announced the lowering of India’s Gross Domestic Products(GDP) growth to 5.8% from 6.2%.
Facts:
- The reasons for lowering the growth rate are (a)investment-led slowdown (b)weak consumption (c)financial stress among rural households and (d)weak job creation.
- Further, credit crunch among Non-Bank Financial Institutions(NBFIs) who have been major providers of retail loans in recent years has increased the problem.
- However,Moody’s has said that it expects a moderate pickup in real GDP growth and inflation over the next two years through monetary and fiscal stimulus.
Fiscal Deficit:
- Moody has said that the recently announced corporate tax cuts and lower nominal GDP growth may increase the fiscal deficit to 3.7% of GDP in financial year 2019 marking a 0.4 percentage point slippage from its target.
- It also said that the structural need for spending on public sector salaries, welfare schemes and infrastructure is also a major cause of India’s deficit.
- Further,the nation’s limited tax revenue base due to a large low-income population has also impacted fiscal deficit.
Additional information:
About Fiscal Deficit:
- Fiscal deficit is the amount of money that the government needs to borrow in a given year because their expenses were more than their revenues.
- In Union Budget 2019,India has set a fiscal deficit target of 3.3% of the Gross domestic product(GDP) for 2019-20.
About Moody:
- Moody’s is an essential component of the global capital markets.
- It providing credit ratings, research, tools and analysis that contribute to transparent and integrated financial markets.
