Turbulent global conditions, policy ‘mis-steps’ weigh on investor confidence
In yet another projection scale-down, Moody’s has revised its estimate on India’s economic growth lower at 5.5 per cent during 2012 and cited the “turbulent” global conditions, domestic policy “mis-steps” and a poor monsoon as the reasons weighing on investor confidence and demand.
Pegging its growth forecast at sub-6 per cent in view of the deterioration in the overall economic environment at home and abroad, Moody’s Analytics said that India's GDP (gross domestic product) growth rate is likely to be 5.5 per cent this year, while it is expected to be 6 per cent in 2013, marking a downward adjustment from 6.2 per cent estimated earlier.
“There has been little policy response from either the Reserve Bank of India or the government and with global uncertainty dragging on, we see nothing on the horizon to lift the economy from its funk,” Moody’s Analytics Senior Economist Glenn Levine said.
Incidentally, the downward revision by Moody’s has come close on the heels of similar scale-down in growth projections by a few other major domestic and global financial services firms such as Citi and CLSA, which cut their estimates for India to 5.4 per cent and 5.5 per cent, respectively, for the fiscal year ending March next year.
Moody’s, in particular, appears to have based its outlook revision on the poor monsoon rainfall during the June-to-September period as it accounts for nearly 60 per cent of the annual precipitation.
Viewing this as the second major factor responsible for the lowering in growth forecast, Moody’s said that since the monsoon was running 20 per cent below long-term averages, it might cut agriculture output and rural incomes, with knock-on effects for consumer demand and food prices, which would reaccelerate from early 2013.
Moreover, while gross domestic product growth during the first quarter was the slowest in nine years, Moody’s noted that the second quarter is likely to witness a similar fate as there is no indication of an upturn till at least the December quarter and possibly later. In such a scenario, confidence among Indian firms has been crushed by weak demand, elevated interest rates, high inflation, and most significantly, the instability created by a weak Central government that has badly lost its way.
In a harsh comment on governance, Moody’s maintained that India's Central Government is the single biggest factor weighing on business confidence and the economic outlook and advocated that Prime Minister Manmohan Singh should turn around quickly or risk becoming a “lame duck” for the remainder of his term.
Keywords: Indian economy, GDP growth, Moody's rating, growth forecast
This is the time when Indian government (UPA) should focus on Some good reforms and policies rather than vote bank politics
such as ...Har hath mai phone.
In my opinion ratings are just assumptions. It doesn't mean that what has been predicted will occur.These rating agencies just want to divert the fast growing nation from it's very near success.
There is a concerted effort to force India to open the FDI in retail. I hope sensibility will prevail. We are doing good as it is. I hope Dr. Manmohan Singh will resist this artificial pressure from Anand Sharma and his ilk.
To Shiva Kumar - Sir, lets not worry about USA, just go out and see what is happening to our country for the last 3 years, it is all down hill. For a change media is telling the truth otherwise is giving a rosy picture but situation has become grim and lets not be in denial mode.
In my opinion the newspapers and media are giving too much hype, for
the rankings given by rating agencies regarding Indian economy. It is
time the newspapers and media focus on positive aspects of Indian
economy. There are reports that USA is facing severe drought and
drinking water is likely to be rationed. The growth rate of US economy
is far below that of India yet the rating agencies are not talking much
about lowering the grade for the US economy.
Moody is sitting in Singapore.They are not in the helm of Indian affairs.Their predictions have failed earlier.We should not read too much in such forecast.
The opposition should learn to work with the Government to bring in the
much needed economic reforms, in India's interest. Otherwise India would
be headed the way of Greece, Spain, etc. The coalition partners and
Congress should also not be a roadblock to things in vital national
interest, including fiscal consolidation and improved investment
climate.
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