India to grow 7.5% in FY16: Moody’s

India to grow 7.5% in FY16: Moody’s
Highlights

Projecting stable growth rate for India, Moody\'s Investors Service on Monday said the economy would grow at 7.5 per cent in the current fiscal and improve marginally in the following year.

It further said RBI is likely to maintain its accommodative stance, supporting the operating environment for banks

The rating agency sees a raise in public-sector investments, particularly in areas such as railways and roads, which will compensate for the weak levels of private-sector capital investment

New Delhi : Projecting stable growth rate for India, Moody's Investors Service on Monday said the economy would grow at 7.5 per cent in the current fiscal and improve marginally in the following year.

"We expect that India's real GDP will grow at 7.5 per cent in the financial year ending March 31, 2016 (FY16) and 7.6 per cent in FY17. These growth rates would be slightly faster than the 7.4 per cent recorded in FY15 and substantially better than from FY12 to FY14," it said in a report, adding "India's economic growth will remain stable".

Moody's further said Reserve Bank will likely maintain its accommodative stance over the outlook horizon, supporting the operating environment for banks.

India's average annual expansion of 7.7 per cent over the past decade is one of the fastest growth rates globally, as its favorable demographics and the opportunities afforded by a large and diverse national market with high levels of savings have overcome the effects of weak physical infrastructure and sometimes disjointed policies.

However, during this long growth period, the country experienced a significant slowdown in FY12-13 driven in part by policy bottlenecks impacting project investments, the report said.

"Over the past two years (FY14-FY15), some of these problems were addressed. There has been a focus on improving the ease of doing business, particularly with respect to approvals required from the government," the report said citing increase in limits on FDI in key sectors like defence and insurance.

Further, there has also been a pick-up in public-sector investments, particularly in areas such as railways and roads, to compensate for the weak levels of private-sector capital investment, it added.

The report also notes that India has weathered the recent volatility in emerging markets much better than peers, as seen in the relatively modest deterioration in the currency, "indicating that investor sentiment remains supportive" of the country's economic outlook.

China’s growth pegged at 6.5%

China's government expects to achieve annual economic growth of "at least 6.5 per cent" through 2020, the top official said, in the first hint of a growth target since a high-level planning meeting last week. The ruling Communist Party is trying to steer the economy to more sustainable growth based on domestic consumption instead of trade and investment but needs to avoid it weakening too much. Growth last year fell to a two-decade low of 7.4 per cent.

"We propose to achieve the goal of creating a 'moderately prosperous society' by 2020, which requires annual economic growth of at least 6.5 per cent over the next five years," said Premier Li Keqiang in Seoul, according to a transcript released by the Cabinet. This year's growth target is "about 7 per cent," though Li and other officials have tried to downplay the significance of that.

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