Moody’s said India’s economy is powered by sustained growth in consumer spending, fostered by moderate inflation, favorable demographics, and strengthening investment, in particular FDI. The recent measures that now allow 100 percent foreign ownership in many sectors will promote further increases in FDI, it said.
Amid low growth in global trade in goods, India’s large services export sector (IT services account for around 18 percent of total exports) provides another source of resilience.
“Moreover, India is relatively less exposed to external factors, including China slowdown and global capital flows. Instead, the economic outlook will be primarily determined by domestic factors,” it said as it forecasted “stable GDP growth at around 7.5 per cent in 2016 and 2017.”
The growth rate gap with other G20 emerging markets will be unusually large. “In the five years to the end of the decade, we expect GDP per capita (at market exchange rates) to increase by 34 percent in real terms in India, compared with only 3.6 percent in the G20 emerging markets excluding China and India,” the report said, according to Financial Express.
However, Moody’s warned, the generally robust economic environment is constrained by “banks’ balance sheet repair and elevated corporate debt” and corporate pricing power being limited by the impact on food price inflation and households budgets of two consecutive droughts.”
