Moody’s upgrade boosts already growing confidence in Indian debt

India’s growth to accelerate to 7.5% this fiscal: Moody’s

India News

India’s economic growth will accelerate to 7.5 per cent in current fiscal and the government’s reform push will help achieve 8 per cent GDP growth rate in about four years, Moody’s said today. In its Global Macro Outlook, Moody’s Investors Service said the ruling BJP’s victory in Uttar Pradesh state elections indicates that the government has remained politically popular despite the demonetisation exercise. “We expect marginally faster growth in India. According to our forecast the economy will grow 7.5 per cent in fiscal year 2017 (2017-18) and 7.7 per cent in fiscal year 2018 (2018-19),” it said. Indian economy grew 7.1 per cent in 2016-17 fiscal. Moody’s, however, cautioned that persistent banking sector weakness from a high proportion of delinquent loans on bank balance sheets will weigh on growth, if not resolved, by constraining credit for investment related activity. Overall, we continue to believe that economic growth will gradually accelerate to around 8 per cent over the next three to four years, Moody’s said, adding that the negative impact of demonetisation on the economy was limited in size and duration. “We believe that the inflation rate will rise to around 5 per cent by the end of this year, once the effect of this temporary factor fades,” it said. Moody’s expect the Reserve Bank of India to hold the policy ‘repo’ rate steady, holding a neutral stance in this growth environment. “Private sector investment has remained weak despite progress on reforms, suggesting that some hurdles to investment remain binding in many cases,” Moody’s noted.