Moody’s expects India’s economy to grow at 7.5% in 2015

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India’s economy is expected to grow marginally higher at 7.5 percent in 2015, according to global rating agency Moody’s. India’s economy is showing an upward trend. Faraz Syed, associate economist, Moody’s Analytics said that first quarter GDP growth is tracking around 7.3 per cent, a slowdown from foregoing quarters. But they think that GDP growth will be 7.5%, and also, this is positive for India’s credit rating in the future. Earlier in the day, Moody’s Analytics had put its growth estimate for the year 2015 at 7.3 per cent, which it later amended to 7.5 per cent.

International Monetary Fund projected that India will overtake China as the fastest growing emerging economy in 2015-16 by clocking a growth rate of 7.5 per cent. While India’s development is expected to stay steady at 7.5% in 2016, China’s growth is expected to fall from 7.4% in 2014 to 6.8% in 2015 and 6.3 % in 2016. World Bank too has similar GDP growth forecast for India for the current fiscal year. India’s economy is on a cyclical upswing and forward-looking indicators suggest domestic demand is gathering momentum, Moody’s analytics has said. Low inflation has enabled the Reserve Bank of India to cut interest rates by half a percentage points easing pressure on the private sector. The government’s infrastructure and disinvestment programs should provide uplift to domestic-oriented industries.

Moody’s feels that the government has taken encouraging steps to reduce rules and regulations. The government wants more foreign businesses to invest in India, with a focus on public and private partnerships. “Foreign investment in India has been weak because of significant red tape and taxes. The government is taking supportive steps to reduce these troublesome regulations to entice more foreign investment. Around 5 per cent of the Rural Electrification Corp was sold in April.

Strong investor demand for the electricity company suggests that the government should have few problems in selling its other assets. Moody’s Analytics is of the view that India’s state-owned companies are incompetent with significant bureaucracy and endemic corruption. Asset sales can make companies more productive and should reduce the supply gap in the economy. Funds raised from disinvestments will be spent on developing India’s weak infrastructure. If revenues fall short, they expect the government to cut expenditure to meet its 3.9 per cent deficit target for 2015-2016.

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