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Moody’s pegs India’s Q2 economic growth to stay around 5.5%

23 Nov 2012 Evaluate

Rating agency, Moody's in its latest report ‘India Outlook, Risk Receding’ expects Indian economy to register a growth in the range of 5.5-6% this year. Further for the Q2, it expects a steady acceleration from the first quarter of 2013 at 5.5%. As per Moody’s, an initial spike in investor sentiment after recent reforms has faded and the reality of India's deep-seated structural problems has also begun to set in. The country's GDP numbers for July-September quarter is scheduled to be announced next week on November 30.

Moody's outlook for Indian economy is much lower than 7.5% projected by the Finance Minister for this financial year and in line with Reserve Bank of India (RBI) projections. The RBI in its monetary policy review on Oct 30 had lowered its economic growth projection from 6.5% set early this year to around 5.8%.

Moody’s, however suggests that the growth rate should be near the bottom of its current downward cycle. Though, the economy is growing well below its long-term potential as the reforms proposed by the government may help to reduce the key risks facing the economy but cannot lift the near-term outlook. Further added that outlook is for a steady upturn in growth across the coming quarters before growth finally hits potential by the second half of 2014.  India had been growing around 8-9 percent before the global financial meltdown of 2008 but has slipped down in 2011-12 to a nine-year low of 6.5 percent.

Moreover, recent economic data have been broadly in line with expectations as the corporate sector stood at the weakest pocket of the economy with sentiment weighed down by external weakness and the Congress-led government's cack-handed management and policy making in its second term, Moody added. On the fiscal deficit front, Moody's expect it to be close to 6% as against 5.1% targeted by the government.

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