Moody's sees Indian economy flat at 6.5%
Moody's sees Indian economy flat at 6.5%
Associated Press, New Delhi
India's economy is likely to grow at 6.5 percent in the coming
years, international credit rating agency Moody's Investors
Service said on Tuesday, just three months after it gave India an
investment-grade rating for the first time.
"While economic growth is not expected to continue at the pace
that was achieved in 2003-04, we anticipate that annual growth
will average a still respectable 6.5 percent in the years ahead,"
Moody's lead analyst for India, Kristin Lindow, said in a
statement from Hong Kong.
The nation's economy is estimated to have expanded 8.1 percent
in the fiscal year that ended March 31, largely due to a surge in
farm output that contracted in the previous year because of
drought.
"Even at 'just' 6.5 percent, India is likely to attract much
more capital going forward than has been the case historically,"
Lindow said in the statement.
In January, Moody's rated the country Baa 3 - the first time
India has received such a high investment grade from any agency.
The Baa rating indicates a stable economic outlook for the
country surveyed.
"The country's external financial position is consistent with
or even stronger than its Baa peers," Lindow said.
India's foreign exchange reserves topped US$112 billion,
nearly twice the amount the country spends on funding its annual
imports, according to the latest estimates from the central bank.
Many analysts believe India, with one of the world's fastest-
growing economies, will see annual growth accelerate as the
nation becomes increasingly competitive.
The buoyancy in economic growth and India's surging foreign
exchange reserves have prompted several international agencies to
upgrade their rating of the country as an investment destination.
Lindow, however, cautioned that growth and its positive
effects will be difficult to maintain in the absence of increased
investment in human and physical infrastructure and a fiscal
adjustment that would leave more room for private investment to
expand.
"The willingness of politicians to correct the worsening
fiscal situation has traditionally been lacking," she said,
adding there is an opportunity for a fresh reform commitment
after the national elections that will take place in the four
weeks starting April 20.
"Moody's expects that the next administration will be
favorably disposed to additional economic adjustments, to the
extent that reforms are given credit for recent economic
buoyancy. Hopefully, this will include more aggressive fiscal
tightening," she said.
The consolidated gross debt of India's federal and state
governments has increased to around 85 percent of the gross
domestic product, Moody's said.