Wed, Aug 19, 2015 - Page 15 News List

Moody’s cuts its economic forecast for India this year

Bloomberg

Moody’s Investors Service yesterday lowered its growth forecast for India, saying below normal rainfall would offset higher government spending.

GDP is expected to expand about 7 percent this year from an earlier estimate of as much as 7.5 percent, Moody’s said. It still sees 7.5 percent growth for next year.

“Looking at the domestic demand factors, those were what we expected to drive growth up,” Moody’s sovereign analyst Atsi Sheth told Bloomberg TV India. “We’re adjusting growth down because that hasn’t happened — the acceleration hasn’t happened as we’d expected.”

Moody’s this month joined Reserve Bank of India Governor Raghuram Rajan in calling for fiscal and regulatory actions to spur Asia’s third-largest economy. An impasse in parliament has stalled crucial bills, putting at risk Indian Prime Minister Narendra Modi’s plan of unifying the states under a national sales tax by an April deadline.

A key risk to Moody’s growth forecast is a slowdown in the pace of reforms “once the least controversial aspects of the government’s plan have been implemented,” Moody’s analysts led by Marie Diron wrote in the report.

The IMF predicts India’s economy would grow 7.5 percent in the 12 months through March next year, compared with a government forecast of 8 percent to 8.5 percent for the same period.

Rajan on Aug. 4 left interest rates unchanged at one of the highest levels in Asia as he looks to keep inflation within a 6 percent target for January and then lower it toward 4 percent in the months ahead.

“Barring a large shock to commodity prices or food inflation, we think that the central bank’s inflation targets are achievable,” Moody’s said.

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