Finance Minister Nirmala Sitharaman admitted that the World, as well as the Indian economy, is going through a hard phase. There is a need to recall the sluggishness in the economy and why it is happening.
The finance minister stated that "India's growth rate reached the lowest level in the past six years. It was at a level of five percent in June. This was witnessed due to the decline in demand as well as the impact of private investment and trade war in global markets."
The Reserve Bank of India, while reviewing financial policy in October, had lowered the growth rate projection from 6.9 percentage to 6.1 percent. The RBI had expected that the growth rate would accelerate in the second half of the fiscal year. The government had set up a fund of Rs. 25,000 crore for corporate tax reduction, capital investment in public sector banks and real estate sector to reduce sluggishness, thereby accelerating the economy.
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The global rating agency made India's credit outlook negative. This is believed to be the first step towards reducing credibility. Moody's may have stated that the government has partially succeeded in solving economic weakness, but the risk of further growth rate has increased. Moody's kept the forex rating on baa2 but projected a fiscal deficit of 3.7 percent compared to gross domestic product (GDP) for the fiscal year ended March 2020. The government estimates a fiscal deficit of 3.3 percentage. It is thought that the decline in revenue due to the sluggish growth rate and corporate tax cuts may shock the government on the fiscal deficit front.
Japanese brokerage company Nomura has slashed India's growth rate estimate. Nomura said India's growth rate (GDP) will be 4.9 percent in the current fiscal. At present, India's economy is undergoing a lot of sluggishness, which has now been curtailed by earlier estimates. Earlier, Nomura had projected a growth rate of 5.7 percentage. While the RBI had projected the growth rate to be 6.1 percent, Nomura's estimate has now come down to the lowest. On Friday, rating agency Moody's had changed the outlook of India's economy from positive to negative. In the June quarter, the economy achieved a five percent growth pace, which is the lowest in the last six years.
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