Global rating agency Moody’s on Tuesday lowered India’s growth forecast for 2015 to 7 per cent from earlier projected 7.5 per cent over monsoon concerns. It retained the forecast for 2016 at 7.5 per cent but cautioned that the slow pace of reforms of the Modi Government pose further risks to growth.
“We have revised our GDP growth forecast down to around 7 per cent, in light of a drier than average monsoon although rainfall was not as low as feared at the start of the season,” Moody’s Investors Service said in its Global Macro Outlook for 2015-16.
Last month, Fitch Ratings had lowered its GDP growth forecast for India to 7.8 per cent for the current financial year 2015-2016 from an earlier projection of 8 per cent. For 2016-2017, it cut its projection to 8.1 per cent from 8.3 per cent. The agency listed deficient rains, lack of pick-up in capital expenditure and weak rural and export demand as the factors leading to the revision in its forecast.
The growth outlook is resilient beyond the short-term monsoon effects and in fact benefits from the fall in commodity prices over the past year as India is a net importer of commodities, Moody’s said on Tuesday. Economic activity, it further said, will continue to strengthen on the back of a gradual implementation of reforms that foster domestic and foreign investment.
“One main risk to our forecast is that the pace of reforms slows significantly as consensus behind the need for reform weakens once the least controversial aspects of the government’s plan have been implemented,” said Moody’s.
The fall in inflation, it said, would lead to income gains resulting in consumption growth.