Mumbai, Dec 14 (IANS): Global credit ratings agency Moody's on Thursday said that liquidity constraints faced by some non-bank financial institutions will likely tighten overall credit supply and slow India's economic growth rate to just above 7 per cent for the fiscal 2019 and 2020.

According to the Moody's Investors Service, liquidity constraints faced by some NBFIs, after the default of Infrastructure Leasing & Financial Services (IL&FS) in September 2018, will likely tighten overall credit supply in the country.

"Consequently, India's GDP growth will slow to just above 7 per cent for fiscal 2019 and 2020. This result is below an estimated 7.4 per cent outturn in the fiscal year ending March 2018 and below the pick-up in growth that we envisaged a few months ago," said Michael Taylor, a Moody's Managing Director and Chief Credit Officer for Asia Pacific in a statement.

"In addition, any further distress in the Indian NBFI sector will pose significant downside risks to India's growth outlook."

As per the statement, India's NBFIs are an important provider of credit to the country's economy and, in the fiscal year ended March 31, 2018, accounted for nearly 17 per cent of total loans and one third of total retail loans.

"In a downside scenario, a sharper slowdown in NBFI credit supply would significantly tighten overall credit availability, drive up borrowing costs and reduce economic growth by around half a percentage point over a few years," says Joy Rankothge, a Moody's Vice President and Senior Analyst.

"Weaker nominal GDP growth over a prolonged period would weigh on India's fiscal strength and the overall sovereign credit profile," added Rankothge.

Moody's conclusions are contained in its just-released report titled "Cross-Sector-- India: Slowdown in non-bank credit growth to weigh on economy".