7.5% growth in FY16, higher growth next year: Moody's

Projecting stable growth rate for India, Moody’s Investors Service on Monday said the economy would grow at 7.5 per cent in the current financial year and improve marginally in the following year.

“We expect that India's real GDP will grow at 7.5 per cent in the financial year ending March 31, 2016 (FY16) and 7.6 per cent in FY17. These rates would be slightly faster than the 7.4 per cent recorded in FY15 and substantially better than FY12-14,” it said in a report, adding “India's economic growth will remain stable”.

Moody's further said Reserve Bank is likely to maintain its accommodative stance over the outlook horizon, supporting the operating environment for banks. “An accommodative monetary policy should support the growth environment,” it added.

India’s average annual expansion of 7.7 per cent over the past decade is one of the fastest growth rates globally, as its favourable demographics and the opportunities, afforded by a large and diverse national market with high levels of savings, have overcome the effects of weak physical infrastructure and sometimes disjointed policies.

However, during this long growth period, the country experienced a significant slowdown in FY12-13, driven in part by policy bottlenecks impacting project investments, the report said.

“Over the past two years (FY14-FY15), some of these problems were addressed. There has been a focus on improving the ease of doing business, particularly with respect to approvals required from the government,” it said, citing increase in limits on foreign direct investment in key sectors like defence and insurance.

Further, there has also been a pick-up in public-sector investments, particularly in areas such as railways and roads, to compensate for the weak levels of private-sector capital investment, it added.

The report also notes that India has weathered the recent volatility in emerging markets much better than peers, as seen in the relatively modest deterioration in the currency, "indicating that investor sentiment remains supportive" of the country's economic outlook.

"It is pertinent to highlight here that, in contrast to a few other emerging markets, India is a key beneficiary of decline in commodity prices, especially oil," the report said.