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16
January 2017
Global
credit rating agency Moody's Investors Service and its Indian affiliate ICRA
Ltd on Monday said India will remain one of the fastest growing major economies
globally in 2017 and the government will likely achieve its fiscal deficit
target of 3.5 per cent of GDP for the current fiscal year ending March 31. The Total Investment & Insurance Solutions
In
a statement issued on Monday, Moody's said India will be one of the fastest
growing major economies in the world in 2017 although gross domestic product
(GDP) growth will moderate in the first half of the year as the economy adjusts
after demonetisation.
ICRA
expects the country's growth of gross value added at basic prices to remain
healthy in 2017 although such growth will ease somewhat to about 6.6 per cent
from around 7 per cent in 2016, with a likely pick-up in the second half of
2017.
"Even
after the currency in circulation is replenished, we expect India's economic
growth will stabilise with a lag while remaining strong," said Aditi
Nayar, an ICRA Principal Economist.
"The
adjustment and recovery period could stretch to as much as 2-3 quarters for
certain sectors," Nayar added. The Total
Investment & Insurance Solutions
According
to ICRA, the focus on digital transactions and the introduction of a goods and
services tax (GST) will likely reduce the competitiveness of the unorganised
sector.
As
a result there will be a relatively healthier expansion of the organised
sectors in 2017 at the cost of the unorganised sectors. The Total Investment & Insurance Solutions
ICRA
further pointed out that the low agricultural growth in H1 2016, as well as
healthy reservoir levels on a seasonally adjusted basis, will support the pace
of expansion of agricultural output in the first half of 2017. The Total Investment & Insurance Solutions
But
agricultural growth in subsequent quarters will be influenced by various
factors, the most important being the magnitude and dispersion of monsoon
rainfall.
ICRA
also said the loss of incomes in some sectors and deferral of consumption were
likely to weigh on capacity utilisation, delaying the capacity expansion plans
of the private sector.
And
the extent of capital spending budgeted by the central and state governments
for the fiscal year ending March 31, 2018 will affect the extent to which
infrastructure spending can stimulate growth in a non-inflationary manner. The Total Investment & Insurance Solutions
"Nevertheless,
economic and institutional reforms already introduced and potentially
forthcoming, continue to offer a reasonable expectation that India's growth
will outperform that of its similarly rated peers over the medium term, and
that the country will achieve further improvements in its macroeconomic and
institutional profile," said William Foster, a Moody's Vice President and
Senior Credit Officer. The Total Investment
& Insurance Solutions
Moody's
and ICRA point out that after a temporary dampening effect on consumption and
investment in the medium term, demonetisation will strengthen India's
institutional framework - by reducing tax avoidance and corruption - and should
support efficiency gains through a greater formalisation of economic and
financial activity. The Total Investment
& Insurance Solutions
On
the issue of average consumer price index (CPI) inflation, ICRA said the rate
will soften to 4.5 per cent in 2017 from 4.9 per cent in 2016. The Total Investment & Insurance Solutions
Key
factors that will dominate CPI inflation in 2017 include monsoon dynamics, the
impact of the GST on prices of various goods and services, commodity price
movements, and the INR-USD exchange rate.The
Total Investment & Insurance Solutions
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