Moody’s forecasts for India: 7.5 percent growth in 2016

India growth forecast

Amid the gloom in the global economy, India is set to remain a source of cheer and optimism. The Indian economy will grow at 7.5% in 2016 and 2017 as it is relatively less exposed to the  slowdown in China and will benefit from lower commodity prices, leading credit rating agency Moody’s has said in its forecast.  However, the agency also warned that the generally robust economic environment is constrained by “banks’ balance sheet repair and elevated corporate debt” and corporate pricing power being limited by the impact on food price inflation and households budgets of two consecutive droughts.”

Releasing its report ‘Global Macro Outlook 2016-17 – Global growth faces rising risks at time of policy constraint’, it said that growth will fail to pick up steam over the next two years as the slowdown in China, lower commodity prices and tighter financing in some countries weigh on the economy.

“Together with Turkey and China among the G20 emerging markets, India benefits from lower commodity prices: in 2014, net commodity imports amounted to 5.9% of India s GDP, compared with net exports worth 1.3%, 3.3% and 4.3% for South Africa, Brazil and Indonesia respectively,” the report said. India, which is a consumer driven economy,  has helped it tide over the global crisis in recent years.

Despite low growth in global trade in goods, India’s large services export sector provides another source of resilience, the report stated. The report also said that the economic outlook will be primarily determined by domestic factors. Moody’s forecast “stable GDP growth at around 7.5% in 2016 and 2017.”  

“India’s economy is powered by sustained growth in consumer spending, fostered by moderate inflation and still favourable demographics, and strengthening investment, in particular FDI”, Moody’s said.

 

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