India's economic growth is expected to remain sluggish at 5.5 percent in the financial year beginning April 1, 2014, as the general elections will delay reforms, international ratings agency Moody's said Monday.
Moody's said in a report that India's gross domestic product (GDP) "growth should remain weak, at 5.5 percent in the fiscal year ending March 2015, as elections due in the next three months will delay reforms needed to revive growth."
"In addition, the rupee will remain volatile, making the operating environment more challenging for importers and exporters," it said.
"In terms of specific sectors, our outlook is negative for the refining and marketing sector. We expect refining margins to stay weak and for companies to suffer delays in subsidy reimbursements due to the upcoming elections," Vikas Halan, a Moody's vice president and senior analyst, said in the report.
"Our outlook is also negative for the steel, metals and mining sectors, because the weak economy and capacity expansions will weigh on the margins and utilization rates of steelmakers," Halan added.
Moody's said its overall outlook for India's non-financial corporates in 2014 is negative because of the country's weak economy, political uncertainty and the expected gradual scale back of quantitative easing by the US Federal Reserve.
"In particular, our outlook is negative on many domestically focused sectors or sectors that are exposed to the vagaries of regulation and policy-setting. By contrast, our outlook is largely stable on sectors that are more exposed to international trade flows or to exports," said Halan.
Moreover, Moody's outlook for the exploration and production sector is stable, as a near doubling of gas prices from April 2014 will lift upstream revenues. However, the fuel subsidy burden on upstream companies could remain high, despite Moody's expectation of a decline in total fuel subsidies.