Indian GDP to grow faster this fiscal at 7.5pc: Moody's
The Indian economy will grow at 7.5 percent in the current fiscal, which will accelerate to 8 percent in about four years, US rating agency Moody's said on Wednesday, ahead of the release of GDP figures for 2016-17 later in the day.
"We expect marginally faster growth in India. According to our forecast the economy will grow 7.5 percent in fiscal year 2017 (2017-18) and 7.7 percent in fiscal year 2018 (2018-19)," Moody's Investors Service said in its Global Macro Outlook.
"Overall, we continue to believe that economic growth will gradually accelerate to around eight percent over the next three to four years," it said.
The American agency also said that the negative impact of the November 8 demonetisation of high-value currency on the economy was limited in size and duration.
"The ruling BJP's victory in the Uttar Pradesh State elections indicates that the government has remained politically popular despite the demonetisation exercise," the report said.
The government has pushed through major reforms like further liberalising foreign direct investment (FDI) rules in a number of key sectors, the Direct Benefit Transfer scheme for food, fertiliser and kerosene subsidies, the Goods and Services Tax (GST) and a National Bankruptcy Code.
"Together, these will help reduce inefficiencies and improve trend growth over the long run," Moody's said.
The rating agency, 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".
"Private sector investment has remained weak despite progress on reforms, suggesting that some hurdles to investment remain binding in many cases."
Moody's said the inflation rate in India has steadily declined to three percent as of April, owing to weaker food price inflation.
"We believe that the inflation rate will rise to around five percent by the end of this year, once the effect of this temporary factor fades," it said.
With the Reserve Bank of India's monetary policy review due next week, Moody's expects the RBI to maintain status quo on its key interest rate, given the Central bank's recent shift in policy stance to "neutral".
Earlier this week, the World Bank estimated that India's GDP in the current fiscal would grow at 7.2 percent. For 2016-17, the multilateral lender expected the country's growth to register a fall to below seven percent.
In its earlier projection of GDP growth for the last fiscal, the Indian Central Statistics Office (CSO) has said the economy will grow at 7.1 percent. During the third quarter ended December, India's GDP grew at 7 percent.
"Real GDP at constant (2011-12) prices for the year 2016-17 is estimated at Rs 121.90 lakh crore showing a growth rate of 7.1 percent over the year 2015-16 of Rs 113.81 lakh crore," the Central Statistics Office said in a statement on Wednesday.
In terms of gross value added (GVA), which excludes indirect taxes, the growth came in even lower at 6.6 percent over the GVA for 2015-16.
The GDP growth for the fourth quarter of last fiscal also fell more sharply to 6.1 per cent.
The Central government has met its budgeted target of 3.5 percent fiscal deficit for 2016-17, official data showed on Wednesday.
According to figures released by Controller General of Accounts (CGA), fiscal deficit -- the difference between revenue and expenditure -- for the last financial year slightly exceeded the budgeted target of Rs 5.35 lakh crore as against the budget estimates of Rs 5.34 lakh crore.
The fiscal deficit target for the last fiscal was pegged at 3.5 percent, while that for 2017-18 has been set at 3.2 percent.
The exchequer's tax revenue during the fiscal under review yielded Rs 14.80 lakh crore, or 97.3 percent of the estimates. The total expenditure during the April-March 2016-17 period was Rs 20.14 lakh crore, or 98 percent of the entire fiscal's estimate.
