Amid a worsening economic slowdown, US rating agency Moody’s on Friday lowered India’s GDP growth forecast for the 2019 calendar year to 6.2 per cent, from its earlier estimate of 6.8 per cent, and also revised downwards its growth forecast for 16 economies in the Asia-Pacific region.

The Moody’s Investor Service report also cut India’s gross domestic product (GDP) growth rate for 2020 by a similar 0.6 percentage points to 6.7 per cent.

“The moderation in business sentiment and slow flow of credit to corporates have contributed to weaker investment in India,” a Moody’s release said.

A weaker global economy has stunted Asian exports and the uncertain operating environment has weighed on investment, according to the ratings multinational.

The report said externally oriented economies in the region saw a sharper slowing during the first six months of 2019, while domestic factors have had a greater influence on growth in India, Japan and the Philippines.

Of the 16 economies surveyed, Hong Kong and Singapore have shown particularly weak expansion this year, with very large deteriorations in real GDP growth when compared to the first half of 2018.

“In particular, softer capital formation has mirrored the weakening in exports, especially for trade-reliant economies such as Korea and Hong Kong,” it said.

In Malaysia and Sri Lanka, fiscal tightening has acted as a drag on growth.

The Amereican agency also said the slower overall GDP growth in the region has not yet weighed significantly on the broader employment situation, while generally benign inflationary conditions have supported purchasing power across Asia-Pacific.

Meanwhile, Indian markets fell on Friday after a top official dampened hopes of a stimulus package to support a misfiring economy and ease a liquidity crunch in Asia’s third-largest economy.

India’s economic growth has slowed in the past three consecutive quarters, losing its status as the world’s fastest-growing major economy to China, with unemployment at its highest since the 1970s.

Industry figures have been calling on newly re-elected Prime Minister Narendra Modi’s government to provide more of a fiscal boost as signs multiply that numerous sectors are suffering a painful slowdown.

But Krishnamurthy Subramanian, the government’s chief economic advisor, suggested on Thursday that state intervention creates a “moral hazard” and is “anathema to the way the market economy functions”.

Reportedly under pressure from the government, India’s central bank in August cut interest rates for the fourth time this year to a nine-year low in an attempt to boost growth.

The automotive sector is particularly stricken, with car sales plunging 31 per cent in July, the ninth consecutive monthly drop, prompting manufacturers to halt production at some plants.

India’s largest biscuit maker Parle Products warned this week that it might have to lay off up to 10,000 workers if the government doesn’t cut sales taxes.

Part of the problem is that India’s banks are reluctant to lend following a slew of bad loans, with the deputy head of government think-tank Niti Aayog calling for Modi’s government to “take steps that are out of the ordinary”.

“For the last 70 years, we have not faced this kind of a liquidity situation. (The) entire financial sector is up in a churn and nobody is trusting anybody else,” Rajiv Kumar said.

Gross domestic product (GDP) for the world’s sixth-biggest economy grew 5.8 per cent in the final quarter of 2018, down from 6.6 per cent in the previous quarter.

Economists at Nomura predicted this week a further slowing of momentum, forecasting growth of 5.7 per cent in the first three months of 2019. GDP data are due next Friday.

Shares fell sharply on Thursday on Subramanian’s comments with the Sensex index dropping almost 600 points. On Friday morning the index fell almost 100 points before recovering slightly.

When Prime Minister Narendra Modi was re-elected in May with a sweeping majority, Indian stock markets jumped to all-time highs as investors anticipated big bang pro-business reforms to revive a flagging economy.

But sentiment is souring in the country’s boardrooms after a much-anticipated budget in July failed to provide any stimulus, and instead hiked taxes on the ultra-rich and on foreign portfolio investors.

Several businessmen say Modi’s government needs to take swift action on the economy, but instead it seems preoccupied with the situation in Kashmir, which is under a lockdown after authorities curtailed the autonomy of the restive region.

Agencies