Investors unhappy over pace of reform: Moody’s

India is likely to be the fastest growth economy amongst the G20 nations, according to the forecast.  

Results of polls global ratings agency Moody’s carried out in Mumbai in May reflect some “disappointment amongst investor audiences with regard to the pace of reform” under the Modi government, and “increasing concerns about the risk of policy stagnation.” Almost half of the poll respondents identified “sluggish reform momentum as the greatest risk to India’s macroeconomic story.”

Project approval delays, were seen to be the biggest challenge for the infrastructure sector, according to the Moody’s survey, followed by the lack of available funding. The survey, part of Moody’s Inside India quarterly report released on Tuesday, found that sluggish reform momentum was perceived as the greatest risk (47 per cent) to India’s country’s macro-economic story over the next 12-18 months, followed by infrastructure constraints at the second place (38 per cent) and external shocks at the third (10 per cent).

However, the consensus view on India’s economic growth prospects, according to Moody’s, is relatively optimistic and in line with Moody’s baseline projection of 7.5 per cent growth in 2015-16. India is likely to be the fastest growth economy amongst the G20 nations, according to the forecast.

Subdued rural economy

Moody’s also expects India’s weakened rural economy to remain subdued through the 2015-16, especially if the India Meteorological Department’s prediction of a below-average monsoon comes true. As of June 29, the monsoon has been 18 per cent above average.

“A sustained soft patch for India’s rural economy would weigh on private consumption and non-performing assets in the agricultural sector, a credit negative for the sovereign and banks,” said Moody’s Vice President and Senior Research Analyst Rahul Ghosh.

Rural income growth has been stuck in the mid-to-low single digits in 2015 to date, well off the 20 per cent-plus rates clocked in 2011. The slower rural income growth is partly the result of increased fiscal restraint by the Central government, which Moody’s believes is unlikely to change in the coming quarters.

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Printable version | Nov 29, 2020 11:48:34 PM |

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