2016-2017 economic forecasts

Moody's anticipates a growth of 7,5% in India

Business & Politics

News - Biz@India

February 18, 2016

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Biz@India



Moody’s, one of the leading credit rating agencies, forecasts in its last Investors Service report that the Indian economy will experience a 7,5% growth in 2016 and 2017. It expects India will take advantage of low commodity prices and limit its exposure to external problems like the Chinese economic slowdown.

It warned though against negative factors still in place, such as “banks’ balance sheet repair and elevated corporate debt” and against the persistent pressure on consumers, because of food price inflation and droughts, notably in rural areas.

In a world economy which fails to rebound, because of China’s weakness, of depressed commodity prices and tighter financing on the whole, India is still comparatively a soft spot. The country, a net commodity importer, benefits the fall of oil and gas prices and still can rely on solid services segments, such as IT services, says Moody’s.

It points at favourable factors in India: a catch up pattern in consumer spending, sustained by favourable demographics in a young country ; a relatively moderate inflation, in line with the Reserve Bank of India 5% target ; a pick-up in investment, notably in Foreign Direct Investments (FDI) ; and a more than 20% increase of salaries decided in the public sector.

As a consequence, it believes India will do better than others.

“In the five years to the end of the decade, we expect GDP per capita (at market exchange rates) to increase by 34 per cent in real terms in India, compared with only 3.6 per cent in the G20 emerging markets excluding China and India”, writes Moody’s in its “Global Macro Outlook 2016-17” report.

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