S&P projects economy to grow at 7.9% in FY16

The rating agency had earlier projected the economy to grow 6.2% in 2015-16 and 6.6% in 2016-17

A day ahead of tabling of the Economic Survey in Parliament, Standard & Poor's on Thursday pegged India's economic growth at 7.9 per cent for 2015-16 and 8.2 per cent for the next financial year, against 7.4 per cent expected in the current financial year. It termed India as the "bright spot" in Asia-Pacific.

The rating agency had earlier projected the economy to grow 6.2 per cent in 2015-16 and 6.6 per cent in 2016-17, but those were based on the old definition of gross domestic product (GDP) and the base year. Since then, definition of GDP has been changed to include indirect taxes (net of subsidies), besides the new base year of 2011-12 compared to 2004-05.

The projections came within days of S&P flagging concerns over low per capita income of the economy and high fiscal deficit of the government, saying these constrain India's credit ratings. Whether the government is able to contain its fiscal deficit at targeted 4.1 per cent for 2014-15 would be known in the Budget, to be tabled on Saturday.

The indications would also be available on Friday, when the fiscal deficit data for the first 10 months are out.

The agency, which rates India among the lowest in the investment grade at BBB-, said the rising investment and low oil prices are the primary factors boosting the chances for the economy.

In the press note, the agency said growth in the Asia-Pacific region will be slightly lower, but India's "star is rising".

"Weaker growth in China and Japan may be weighing on the overall sentiment, although India's star is rising," it said.