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Moody’s pegs India’s GDP growth rate at 6% in 2016 |
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While economic rebound is unlikely in other countries, India is set to buck this trend with the country’s GDP set to rise to more than six per cent in 2016 from five per cent in 2015, Moody’s global macro outlook released on Tuesday said.
Global GDP growth is unlikely to rebound significantly in the next two years, as a gradual slowdown in the Chinese economy and structural impediments go growth in the Euro area, Brazil and South Africa continue to weigh on economy activity, Moody’s investors service said in its quarterly outlook report.
For the G20 economies as a whole, the rating agency expects GDP growth of around 3 per cent in 2015 after 2.8 per cent in 2014. Various estimates for India, which clocked sub-five per cent GDP growth in the last few years, has forecast a growth rate ranging from 5.4-49 per cent this financial year, which is likely to go up to 6.5 per cent in 2015-16.
The green-shoots are already visible and with investors’ confidence improving remarkably after the NDA government assumed office, the progress is visible in stalled projects, particularly in the infrastructure sector. There are also some signs of fresh investment.
Although exports account for a significant part of the economy, India benefits from diversified export markets that have sheltered the economy from the slowdown in China and muted growth in the euro area and Japan, Moody’s said.
Moreover, India's more favourable demographics fuel robust consumption growth and ensure ongoing rapid increase in the labour force. India is also a net commodity importer and will therefore benefit from the fall in commodity prices, which will help lower inflation, in particular at a time when fuel subsidies are being removed, it said.
“Most factors that have weighed on global GDP growth in 2014 will remain in place in the next two years, including the gradual slowdown in China,” says Marie Diron, a Moody's senior vice president and author of the report.
The latter has led to a very sharp deceleration in its imports and has dampened export growth globally. “Moreover, structural deficiencies in some countries and regions - including the euro area, Brazil and South Africa - are also preventing a significant rebound in growth,” continues Diron.
The growth outlook for emerging markets is mixed, with an ongoing slowdown in China, subdued growth expected to continue in Brazil and a shallow recession in Russia contrasting with prospects of stronger growth in India.
“We expect China’s GDP growth to continue to decline gradually, to just below 7 per cent in 2015 and slightly lower in 2016, from 7.3 per cent in 2014, as the authorities pursue their objective of rebalancing the economy away from debt-fueled investment towards consumption while achieving sustained employment growth.
Slower GDP growth in China will dampen export volumes and revenues, in particular for commodity exporting countries such as Brazil and SouthAfrica. In turn, this will exacerbate impediments to growth in non-commodity sectors.
In contrast, as already implemented and planned economic reforms spur economic activity, GDP growth is likely to rise above 6 per cent in 2016 in India, it said.
These domestic factors are impinging on economic activity to a greater extent than previously envisaged and have driven a downward revision in Moody's 2015 forecasts for many countries and regions, including the euro area, Japan and Brazil. In contrast, Moody's expects sustained robust growth in the US, UK and India over the next two years.
Source : mydigitalfc.com
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