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NEW DELHI: The worst may be over for the Indian economy with the December quarter likely the bottom of the economic cycle and a steady acceleration in growth is expected in the coming year; Moody's Analystics said on Thursday, bringing much needed comfort battling perception of an acute slowdown.
Moody's Analytics, which is an arm of global ratings agency Moody's Investors Service forecast economic growth in 2013 to be 6.2% from 5.1% in 2012. After presenting his 2013-14 budget, finance minister P Chidambaram has forecast growth of over 6%. Higher growth will translate into higher revenues and be a positive factor in taming the stubborn fiscal deficit.
The agency was more optimistic about the growth prospects from next year onwards, which analysts say should also come as a morale-booster for the government which has been on the back foot over its handling of the economy."Our forecast from 2014 onwards is for economic growth of around 7%, which is India's new rate of trend growth. This well short of the rate near 10% from a couple of years back," Glenn Levine, senior economist at Moody's Analytics said in a report.
But he cautioned that policymakers should be careful while pushing for double-digit growth as this is wildly optimistic and without structural reform, a dangerous view to take. He cited the case of Reserve Bank of India governor D Subbarao's push for double-digit growth. Planning Commission deputy chairman Montek Singh Ahluwalia has also said that the Indian economy can return to the 8% growth trajectory in the coming years on the back of favourable conditions.
"Headlong pursuit of double-digit GDP growth three years ago kept policy setting too loose for too long, causing the economy to overheat and contributing to the current problems of inflation and current account deficit," Levine said in his report.
"Policymakers should end any pretense that the economy can grow at 10% without fanning inflation -it simply can't. Anything above 7% will lift inflation and result in a more painful future adjustment," the Moody's Analytics report said.
Levine said apart from the stability in the global environment, the biggest change is that the government is now on a steady path of fiscal and regulatory reform and better governance.
"The so-called big bang of economic reforms announced since August has helped to lift corporate confidence and should translate into better spending and capital expenditures from mid-2013," Levine said.
"Risks around the economy particularly the fiscal and current account deficits have begun to recede. Gains in financial markets reflect rising expectations around the economy as well as lower risk," the Moody's Analytics senior economist said in his report.
The government has announced plans to continue with rolling back fuel subsidies, taxes on income of high net worth individuals and on some luxury items as well as a modest asset sales programme.
GDP set to grow 6.2% in 2013: Moody’s - The Times of India
Moody's Analytics, which is an arm of global ratings agency Moody's Investors Service forecast economic growth in 2013 to be 6.2% from 5.1% in 2012. After presenting his 2013-14 budget, finance minister P Chidambaram has forecast growth of over 6%. Higher growth will translate into higher revenues and be a positive factor in taming the stubborn fiscal deficit.
The agency was more optimistic about the growth prospects from next year onwards, which analysts say should also come as a morale-booster for the government which has been on the back foot over its handling of the economy."Our forecast from 2014 onwards is for economic growth of around 7%, which is India's new rate of trend growth. This well short of the rate near 10% from a couple of years back," Glenn Levine, senior economist at Moody's Analytics said in a report.
But he cautioned that policymakers should be careful while pushing for double-digit growth as this is wildly optimistic and without structural reform, a dangerous view to take. He cited the case of Reserve Bank of India governor D Subbarao's push for double-digit growth. Planning Commission deputy chairman Montek Singh Ahluwalia has also said that the Indian economy can return to the 8% growth trajectory in the coming years on the back of favourable conditions.
"Headlong pursuit of double-digit GDP growth three years ago kept policy setting too loose for too long, causing the economy to overheat and contributing to the current problems of inflation and current account deficit," Levine said in his report.
"Policymakers should end any pretense that the economy can grow at 10% without fanning inflation -it simply can't. Anything above 7% will lift inflation and result in a more painful future adjustment," the Moody's Analytics report said.
Levine said apart from the stability in the global environment, the biggest change is that the government is now on a steady path of fiscal and regulatory reform and better governance.
"The so-called big bang of economic reforms announced since August has helped to lift corporate confidence and should translate into better spending and capital expenditures from mid-2013," Levine said.
"Risks around the economy particularly the fiscal and current account deficits have begun to recede. Gains in financial markets reflect rising expectations around the economy as well as lower risk," the Moody's Analytics senior economist said in his report.
The government has announced plans to continue with rolling back fuel subsidies, taxes on income of high net worth individuals and on some luxury items as well as a modest asset sales programme.
GDP set to grow 6.2% in 2013: Moody’s - The Times of India
