New Delhi,
Moody’s Investors Service on Wednesday cut India’s 2018 growth forecast to 7.3% from the previous estimate of 7.5%, saying the economy is in cyclical recovery but higher oil prices and tighter financial conditions will weigh on the pace of acceleration.

Moody’s, however, maintained its 2019 growth forecast at 7.5%.

“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% in 2018, down from our previous forecast of 7.5%. Our growth expectation for 2019 remains unchanged at 7.5 per cent,” it said in an update of its ‘Global Macro Outlook: 2018-19’.

Moody’s said growth should benefit from 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.

Also, the ongoing transition to the new Goods and Service Tax regime could weigh on growth somewhat over the next few quarters, which poses some downside risk to the forecast, it said. “However, we expect these issues to moderate over the course of the year.” For the world economy, Moody’s expected 2018 to be a year of robust global growth, similar to 2017.

Moody’s said downside risks to growth stem from emerging markets turmoil, oil price increases and trade disputes.