Policy reforms to support India's growth outlook: Moody’s
22/08/2016 12:29
Moody's Investors Service, a global rating agency, has said that India's (Baa3 positive) credit profile is supported by the strong growth potential of its large economy and the high private savings rate which underpins the government's access to domestic financing at relatively favorable terms.
“These credit strengths are balanced against a high government debt burden -- 67.4 per cent of GDP in 2015 --, regulatory and infrastructure constraints on its competitiveness, slow pace of policy reform, and the contingent liability risk to the sovereign from public sector banks' high and rising non-performing loans,” Moody’s said in a statement.
The rating agency said that over the past year, external developments favorable to India such as lower global oil prices have combined with policy measures - including tighter or less accommodative fiscal and monetary policies than in the past - to move the economy towards a more stable macroeconomic development with smaller fiscal deficits, lower inflation and a narrower current account deficit.
However, one short-term consequence of the policy setting, combined with two successive unfavorable monsoons last year and the year before, has been relatively moderate nominal GDP growth.
The agency said that it expect corporates' profitability to remain muted which will continue to dampen their ability and willingness to invest in the next few quarters. We forecast real GDP growth at around 7.5 per cent in the next two years. In nominal terms, we do not expect GDP growth to rise above 10 per cent until FY2017.
Over time, sustained fiscal consolidation, stable inflation at moderate levels and progress on reforms aimed at enhancing the business environment would contribute to sustained growth at robust levels. In turn, persistent income and profit growth would raise government revenues and contribute to improved fiscal metrics. However, we expect the benefits to be very gradual, the report highlighted.
22/08/2016 12:29
“These credit strengths are balanced against a high government debt burden -- 67.4 per cent of GDP in 2015 --, regulatory and infrastructure constraints on its competitiveness, slow pace of policy reform, and the contingent liability risk to the sovereign from public sector banks' high and rising non-performing loans,” Moody’s said in a statement.
The rating agency said that over the past year, external developments favorable to India such as lower global oil prices have combined with policy measures - including tighter or less accommodative fiscal and monetary policies than in the past - to move the economy towards a more stable macroeconomic development with smaller fiscal deficits, lower inflation and a narrower current account deficit.
However, one short-term consequence of the policy setting, combined with two successive unfavorable monsoons last year and the year before, has been relatively moderate nominal GDP growth.
The agency said that it expect corporates' profitability to remain muted which will continue to dampen their ability and willingness to invest in the next few quarters. We forecast real GDP growth at around 7.5 per cent in the next two years. In nominal terms, we do not expect GDP growth to rise above 10 per cent until FY2017.
Over time, sustained fiscal consolidation, stable inflation at moderate levels and progress on reforms aimed at enhancing the business environment would contribute to sustained growth at robust levels. In turn, persistent income and profit growth would raise government revenues and contribute to improved fiscal metrics. However, we expect the benefits to be very gradual, the report highlighted.
