Prime Minister Manmohan Singh, talking to reporters at Rashtrapati Bhavan, where he was attending the swearing-in ceremony of Vice-President Hamid Ansari, today played down the Moody’s forecast of 5.5 per cent gross domestic product (GDP) growth in the current financial year. He expressed hope that it would be better than the 6.5 per cent recorded in 2011-12.
Earlier this week, Moody’s Analytics, the research unit of ratings agency Moody’s Investors Service, had cut India’s growth forecast to 5.5 per cent, citing a lack action from the government or the Reserve Bank, despite a broad-based slowdown and a poor monsoon.
The government is already under pressure of a looming ratings downgrade to junk, following the Standard & Poor’s April 25 revision of the long-term rating outlook of the country to negative from stable.
Asked to comment on Moody’s analysis of the Indian economy, Singh said: “It is a cause of concern, but one should not draw unwarranted conclusions.”
“The fundamentals of the Indian economy are strong. Investments and savings are among the highest in the world. I am hopeful we will do even better than the 6.5 per cent growth performance of last year,” he added.
Moody’s Analytics Senior Economist Glenn Levine had said: “There has been little policy response from either the Reserve Bank of India or the government and, with global uncertainty dragging on, we see nothing on the horizon to lift the economy from its funk.”
While releasing its outlook on India’s investment scenario, S&P Credit Analyst Takahira Ogawa had said in April: “The outlook revision reflects our view of at least one-in-three likelihood of a downgrade if the external position continues to deteriorate, growth prospects diminish, or progress on fiscal reforms remains slow in a weakened political set-up.”
The government, on its part, has been trying to improve its record on the reform front since then, but it is yet to make a headway.
Keen to prevent a downgrade of India’s sovereign rating by S&P, which could trigger an exodus of foreign investors, Singh had told the Congress party last month that there was no option but to raise diesel prices by at least Rs 5 a litre after the Presidential election.
Prime Minister’s Economic Advisory Council Chairman C Rangarajan had also said yesterday that the overall growth rate for the current year could be slightly better than last year’s 6.5 per cent. He said industrial production should pick up in the second half of the year and agriculture activities’ contribution to GDP should also be higher.