PM downplays Moody’s downgrade on India’s growth estimate; expects economy to surpass 6.5% growth mark

Although concerned over Moody’s downgrade on India’s growth estimate, Prime Minister (PM) Manmohan Singh is confident that fundamentals of the Indian economy remained strong and that the economy would be able to do better than the 6.5% growth recorded in 2011-12, as investment and savings in the country remain highest in the world. Seconding Prime Minister’s views, Economic Advisory Council Chairman C Rangarajan also expects that the overall growth rate for the current year could be slightly better than last year’s 6.5%, as the chances of industrial production picking up in the second half of the year are likely with the agriculture activities’ contribution to GDP also being higher.

Attending the swearing-in ceremony of Vice-President Hamid Ansari, Prime Minister Manmohan Singh, averred that Moody’s analysis of the Indian economy, is a cause of concern, but one should not draw unwarranted conclusions. Citing a deficient monsoon and lack of progress on economic reforms, Moody’s Analytics, research unit of ratings agency Moody’s Investors Service, downgraded India's growth estimate for 2012-13 to 5.5%.

Several economists and research agencies, by now, have downgraded India's growth forecast on account of erratic rains, high interest rates, stubborn inflation, sliding industrial growth and delay in implementing policies. Adding to the flow of negative news, Fitch Ratings, which recently lowered India's credit outlook to negative, has now averred the possibility of downgrading the country's sovereign rating is more than 50 per cent in the next 12-24 months.

Prompting calls for action, India’s growth slowed to a nine-year-low of 5.3% in the January-March quarter while overall economic expansion slowed to 6.5% in 2011-12, lower than the government's estimate of 6.9%. Although Finance Minister P Chidambaram vowed to reverse the trend and has unveiled a roadmap to tackle the slowdown but a major breakthrough solution is yet to evolve.