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Moody's, Economist project higher growth rate for India

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  18 April 2015 12:00 AM GMT

NEW DELHI, April 17: The bullish projections for the Indian economy continue. A week after it revised its outlook on India to positive from stable, global ratings major Moody’s pegged the country’s growth at 7.5 percent for 2015, while the Economist Intelligence Unit said a 7.1 percent expansion will be sustained over the next four years. “India’s economy is on a cyclical upswing. Forward looking indicators suggest domestic demand is gathering momentum,” said Faraz Syed, associate economist, Moody’s Alytics, on Friday.

According to the ratings agency, low inflation rate has ebled the Reserve Bank of India (RBI) to cut interest rates by 50 basis points in early 2015 which has helped in easing pressure on the private sector. “Lower rates as well as the government’s infrastructure and disinvestment programs should provide a boost to domestic-oriented industries,” said Syed.

The RBI had cut its repurchase rate by 25 basis points on January 15 and on March 4.

However, RBI Governor Raghuram Rajan, who conducted the first bi-monthly review of the monetary policy for the current fiscal year on April 7, decided to retain the policy rates.

The RBI made it clear that it will cut interest rates further only if it sees more robust containment of prices and commercial banks lowering the cost of housing, auto and corporate loans.

“Since most banks didn’t reduce their lending rates until recently, the full impact of the rate cuts will probably be felt in the second half of 2015. Thus, consumer spending likely will get a bigger boost later this year,” Syed said.

Rajan has projected a 7.8 percent growth for the current fiscal year, subject to a normal monsoon.

The Economist Intelligence Unit’s (EIU) latest global forecast has pegged India’s growth annual growth to clock 7.1 percent over the next four years.

It said that the Indian economy is strengthening, off the back of lower oil prices, which has eased structural problems with high inflation.

“In its first full budget, for fiscal year 2015-16 (April-March), the government pledged more money for much-needed roads and railways and cut some red tape for entrepreneurs,” EIU’s global forecast said.

“It (government) relaxed slightly some fiscal deficit targets and increased spending on welfare. All of these moves are positive, but are no more than incremental improvements,” the forecast added.

Meanwhile, Moody’s alysis further suggested that the country’s first quarter GDP (gross domestic product) growth will be around 7.3 percent on a year-on-year basis. IANS

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