Recent reforms will boost long-term prospects: Moody’s

The recent Government reforms have helped reduce key risks facing the Indian economy, but will do little to support growth over the next two years.

Growth will stabilise at 5.5-6 per cent across the second half of 2012 and there is little on the horizon to lift growth from current rates, Moody’s Analytics said in a report “India Outlook: Risks Receding”.

The recent reform moves will help shore up India’s long-term prospects, says the report.

The Indian economy is growing below potential but is near the bottom of the current cycle.

Moody’s Analytics has not changed its growth forecast despite the Government’s positive moves. The medium-term growth outlook remains unchanged.

It is, however, confident about the long-term outlook and sees long-run growth potential at 7-7.5 per cent.

Moody’s Analytics sees Indian economy to have expanded by a little more than 5.5 per cent year-on-year in the just ended September quarter.

This growth expectation is roughly the same as those recorded in the January-March and April-June quarters this year, but substantially below where GDP was 12 months ago.

It will be a while before GDP growth is back at the trend rate, says the report of Moody’s Analytics, which is engaged in economic research and analysis and is a division of Moody’s Corporation.

“Our outlook is for a steady upturn in growth across the coming quarters before the growth finally hits the potential by the second half of 2014”.

The Central Statistics Office is due to release the GDP growth numbers for the just ended September quarter next week.

The initial bounce in investor sentiment following the announcement of Prime Minister Manmohan Singh’s Big Bang of economic reforms has faded, and the reality of India’s deep-seated structural problems has begun to set in, it added

srivats.kr@thehindu.co.in

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