NEW DELHI: Ratings agency Moody's on Monday slashed its 2020 growth projection for India to 5.4% from 6.6% forecast earlier on the back of slower recovery, citing largely domestic factors and cautioning that global economy will be adversely impacted by the novel coronavirus (Covid-19) outbreak.It also revised downward the GDP growth forecast for China to 5.2% in 2020, warning severe downside risks to the global economy if the coronavirus grows to pandemic proportions. India is forecast to grow 5.8% in 2021 against 6.7% estimated earlier, while China is pegged slightly lower at 5.7% in 2021.In its February update of Global Macro Outlook, the agency said India’s economy has decelerated rapidly over the last two years. Real GDP grew at a meagre 4.5% in the third quarter (October-December) of 2019-20, it estimated.“Among emerging market countries, we have materially revised downward our growth forecasts for India, Mexico and South Africa. In all four cases, the revisions reflect wholly domestic challenges, rather than external factors,” Moody’s said.Moody’s estimate is significantly lower than that of S&P, which had last week forecast India will recover to 6% next year and 7% in 2021.Official numbers will be released at the end of month. According to statistics office estimate, Indian economy is expected to grow 5% in the current fiscal while the Economic Survey presented on January 31estimates 6-6.5% rise in GDP next fiscal.Moody’s cited data from the Reserve Bank of India ( RBI ) to say that credit impulse in the economy has deteriorated throughout the last year as a result of the drying up of lending from non-bank financial institutions as well as from banks.“Banks have been both unwilling to lend and to lower lending rates despite successive interest rate cuts by the central bank.”“With a weak economy and depressed credit growth reinforcing each other, it is difficult to envision a quick turnaround of either, even if economic deceleration may have troughed,” it said.Improvements in the latest highfrequency indicators such as Purchasing Managers’ Index (PMI) data suggest that the economy may have stabilised.Moody’s suggested revival of domestic demand, both rural and urban, and resumption of credit growth will be the key to stronger economic momentum but added the Union Budget 2020 did not contain a significant stimulus to address the demand slump.Finance minister Nirmala Sitharaman had last week said there were green shoots of recovery.Tax cuts are unlikely to translate into higher consumer and business spending when risk aversion is high, Moody’s said.Moody’s expects additional monetary easing by the RBI but situation could become challenging for more interest rate cuts if higher food prices have second-round effects.On the global prospects, Moody’s said the coronavirus outbreak has diminished optimism on prospects of an incipient stabilisation of global growth this year.With the virus continuing to spread, it is still too early to make a final assessment of the impact on China and the global economy.“We have revised our global GDP growth forecast down, and we now expect G-20 economies to collectively grow 2.4% in 2020, a softer rate than last year, followed by a pick-up to 2.8% in 2021,” it said. Global GDP grew by 2.6% in 2019, significantly below the 3.2% growth rate in 2018.