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  3. Worst over for Indian economy; GDP growth likely to touch 5 to 5.5 percent rate in 2014: Moody's Analytics

Worst over for Indian economy; GDP growth likely to touch 5 to 5.5 percent rate in 2014: Moody's Analytics

23 Jan 2014 Evaluate

The Moody’s Analytic, in its report titled 'India Outlook: Steady Growth, Lower Risk' has noted that the worst is over for the India’s economy with GDP expansion likely to touch 5 to 5.5 percent this year and more than 6 percent in 2015. Presenting a sanguine picture of India's economic outlook, the agency highlighted that the economy has stabilised in recent quarters and downside risks have receded as prospect of better government after the May general elections have boosted business and investor confidence and will be the trigger for the economy. However, Indian economy will slowly improve across 2014 but not hit its potential until 2015, it added. In the previous fiscal, India's economy slowed to a decade low of 5 percent owing to the global slowdown and domestic factors, like high interest rates.

Further, the agency report added that the upturn in growth rate will be led initially by exports, which started to lift from mid-2013, and then later in 2014, by an upturn in the investment cycle. The most notable improvement on the country’s external front over the past few months helped to contain the current account deficit (CAD) at $5.2 billion, or 1.2% of GDP in Q2 FY14 as against the 4.9% of GDP in the Q1 FY14. Referring to domestic currency, Moody’s Analytic has noted that the rupee, which was one of the worst performers among Asian currencies last year, is now less exposed to external worries like the US Fed tapering with the CAD being brought under control. However, it cautioned that such a low CAD may not be sustainable amid probability of further increase of country’s gold imports.

On inflation front, the agency noted that lower inflation will help to lift business confidence and limit downside currency risk. It expect that wholesale price inflation to continue to fall through the first half of 2014 as food inflation eases with better crop yields. WPI inflation eased to five month low at 6.16% in the month of December on y-o-y basis as against 14-month high of 7.52% in November.

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