Moody’s, on Tuesday, said India’s economic growth remained weak and there was little chance of recovery next year.
“Complicated taxes and regulations, weak infrastructure, and a weak central government weigh on confidence and demand. This will turn around eventually, but not in 2014, keeping GDP growth below potential,” Moody’s said in a report. The May elections open possibility of better governance, it said.
Monetary policy over the past three years has been at best ineffective and at worst counterproductive, but this is changing under the new central bank head, Moody’s said.
RBI Governor Raghuram Rajan has made lower inflation the central bank’s primary goal, meaning further rate hikes are likely in the near term, it added.
Dr. Rajan, who delivered two repo rate hikes of 0.25 percentage point each in as many policy reviews since he took over on September 4, had mentioned that he considered fighting inflation as the central bank’s “key responsibility.”
The RBI is expected to raise the repo rate once again on Wednesday by 0.25 percentage point in its bid to tame inflation.
Wholesale Price Index inflation in November climbed to a 14-month high of 7.52 per cent as prices of food items such as onions and potatoes surged. Consumer price inflation touched a nine-month high of 11.24 per cent last month.