United States-based financial services company Moody’s on Friday downgraded India’s projected Gross Domestic Product growth rate to 6.2% for 2019-’20, PTI reported. The company had earlier predicted that India would grow at 6.8%.

Moody’s also said that the country will grow at 6.7% in the 2020-’21 financial year, 0.6% lower than the earlier projection.

“While not heavily exposed to external pressures, India’s economy remains sluggish on account of a combination of factors, including weak hiring, financial distress among rural households, and tighter financing conditions due to stress among non-bank financial institutions,” Moody’s said. “Cooler business sentiment and slow flow of credit to corporates contribute to weaker investment in India.”

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India’s GDP growth tanked to 5.8% in the January-March 2019 quarter, a five-year low. The Reserve Bank of India had downgraded the growth forecast for 2019-’20 to 6.9%.

Moody’s also said that inflation will rise to 3.7% this year and 4.5% in the next from 2.9% in 2018. “Reserve Bank of India has been most active in cutting rates in support of growth, but lingering financial sector issues may blunt the effectiveness of the monetary stimulus.”

The company also announced revised growth forecasts for 15 other Asian economies.

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NITI Aayog Vice Chairperson Rajiv Kumar had on Thursday said extraordinary steps were needed to deal with the unprecedented crisis in the financial sector. He said the government needed to encourage the private sector to invest, and eliminate apprehensions about policies in the minds of private players. However, Kumar claimed that the roots of the economic slowdown lay in the indiscriminate lending during the 2009-’14 period leading to a rise in non-performing assets.

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