Poor domestic consumption impedes economic growth: Moody's

New delhi date. December 16, 2019, Monday

Moody's Investor Services said India's poor housing consumptions (domestic consumption) will impede economic growth and put pressure on credit quality of Indian lenders in various sectors. For the current fiscal year, India's economic growth rate has been estimated by the capital from 8.5 percent to 8.5 percent. Rural financial strain, low employment generation and liquidity pull are the reasons for the decline in economic growth rate, a rating agency report said.

The recession that was once caused by investment has now spread to poor consumption. Rural families are experiencing weakness in consumption due to financial stress due to slowdown in agricultural wage growth.

Employment generation is also seen as weak due to complex land and labor laws. Household consumption is a key aspect of India's economic growth. Domestic consumption accounted for 5% of GDP in FY 6-8.

As with other major markets, India's economic growth rate has declined. The economic growth rate in the September quarter of the year was 5.9 percent, which was five percent in June.

In non-banking finance companies, the financial crisis has worsened the recession. The contribution of non-banking finance companies to retail loans has been huge in recent years.

Domestic income shocks have been witnessing over the past few years, but due to easy availability of financing, the impact has not been as significant. But the impact of this on development is currently being witnessed due to the credit crunch.

The impact of some recent measures taken by the government to increase consumption will be limited in reducing this recession. Measures have been taken to reduce repo rate, cut down on corporate taxes, increase support prices to farmers.