The global credit rating agency, Moody's Investors Service and its Indian affiliate, ICRA in its latest report said that India will remain one of the fastest growing major economies globally in 2017, although GDP growth will moderate in the first half of the year, as the economy adjusts after demonetisation. The rating agencies also said that after a temporary dampening effect on consumption and investment in the medium term, demonetisation will likely strengthen India's institutional framework by reducing tax avoidance, corruption and should support efficiency gains through a greater formalization of economic and financial activity.
The rating agency, Moody's said that the government will likely remain committed to achieving its fiscal deficit target of 3.5% of GDP for the fiscal year ending March 31, 2017. Further it also said that in an environment of lackluster global trade and with economies globally facing the increasing risk of protectionism, India's very large domestic markets provide a relative competitive advantage when compared to smaller and more trade-reliant economies.
On the issue of average CPI inflation, ICRA has said that the rate will decrease to 4.5% in 2017 from 4.9% in 2016. The rating agency anticipates India's growth of gross value added at basic prices to remain healthy in 2017. Further ICRA said that the focus on digital transactions and the introduction of a goods and services tax (GST) will likely reduce the competitiveness of the unorganised sector.
