The agency says that India will overtake China.
By Sreekanth A Nair
International rating agency Standard and Poor’s expects India’s economic growth to be 7.4 percent in 2015-16. This was stated in the first edition of the “India Credit Spotlight” published on Thursday.
India Credit Spotlight analyzes key risks and trends for India’s economy and credit markets.
Standard & Poor’s expects India’s economic growth to be 7.4 percent in fiscal year ending March 31, 2016, and increasing to over 8 per cent in fiscal 2017. “This reflects the increasing importance of the Indian economy and its role as a new growth leader in Asia-Pacific, having overtaken China,” the report said.
It stated that significant reforms are required in the Indian economy as corporations and banks are operating in a weak environment.
The report evaluates the challenges and opportunities of some of the corporate sectors — including steel, IT and gas — the implications of the government’s capital infusions to the public sector banks; and the key factors that may improve the asset quality of Indian banks.
S&P is of the view that the Modi government has not been able to implement key reforms like Goods and Services Tax (GST) since it lacks majority in the upper house of Parliament.
Last week, the Central Statistical Office had said that the economy grew at 7.2 percent in the first half of this fiscal year. The projection of S&P is also seemed to be in line with this.
Even though a growth rate of 8 percent to 8.5 percent was expected in the budget, the Finance Ministry now expects the economic growth at 7.5 percent.
The Asian Development Bank (ADB) has also reduced India’s projected GDP growth from 7.8 percent to 7.4 percent. It estimates a 7.8 percent growth in 2016.
“In addition to slower than anticipated global growth, the revisions reflect expectations that the reforms and improved investor confidence needed to bolster the economy could be months away and could still be set back by potential global market turmoil,” said ADB Chief Economist Shang-Jin Wei.