Moody's Investors Service Inc. has lowered its India growth forecast for 2019 as slow jobs growth is weighing on already-weak consumption.

The credit ratings agency expects the gross domestic product of Asia’s third largest economy to grow at 5.6 percent in 2019, before rebounding to 6.6 percent in 2020 and 6.7 percent in 2021.

This indicates that India for the next two years will grow at a slower pace than 2018.

"We have lowered our 2019 GDP growth forecast for India to 5.6 percent, which is lower than 7.4 percent growth in 2018," Moody's said in a report. "India's economic growth has decelerated since mid-2018, with real GDP growth slipping from nearly 8 percent to 5 percent in the second quarter (April-June) of 2019.”

It further slipped to 4.5 percent in July-September quarter.

"Consumption demand has cooled notably, with slow employment growth weighing on consumption," the report said. "We expect economic growth to pick up in 2020 and 2021 to 6.6 percent and 6.7 percent, respectively, but the pace of growth will remain lower than in the recent past."

According to Moody's, fiscal measures undertaken by the government—corporate tax cuts, bank recapitalisation, infrastructure spending plans, and support for the auto sector and others—do not directly address widespread weakness in consumption demand, which has been the chief driver of the Indian economy.

Additionally, monetary policy transmission has remained inadequate because of the credit squeeze caused by disruption in the non-banking financial sector, it said.

That liquidity crunch has had a bearing on India’s commercial vehicle sales, which fell 22.95 percent year-on-year in the six months of 2019-20.

"Commercial vehicle sales have been hit by the liquidity squeeze in the financial sector and the economic slowdown, despite support from government stimulus measures to boost demand and vehicle purchases ahead of India's migration to new emission standards," Moody’s said.

The credit ratings agency expects auto loan delinquencies to increase in the next few quarters as the economic slowdown will constrain demand for freight transportation and put pressure on freight rates.

"However, the slowing economic growth has yet to significantly impact performance of underlying loans as the decline in commercial vehicle sales over the past quarters has helped ease the surplus capacity situation in the medium and heavy commercial vehicle segments and supported the performance," it added.