S&P pegs economic growth at 8.4% in ’08

S&P pegs economic growth at 8.4% in ’08
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First Published: Tue, Mar 06 2007. 02 38 AM IST
Updated: Tue, Mar 06 2007. 02 38 AM IST
Global rating agency Standard and Poor’s, that upgraded India’s sovereign rating to investment grade in January 2007, on Monday said there were some signs of overheating in the Indian economy and its growth could be moderated to around 7.9-8.4% in financial year 2007-2008.
The Indian government expects the country’s gross domestic products (GDP) to grow at 9.2% in 2006-07, the fastest pace in 18 years, driven by expansion of manufacturing and services sectors.
An S&P release said the growth momentum will be maintained by both industry and services sectors. With persistent efforts made by the Indian Central bank, Crisil, S&P’s Indian subsidiary, believes that inflation will moderate around 5-5% and the dollar–rupee exchange rate remain in the band of 44-45 in financial year 2007-2008.
S&P on Monday issued a release on outlook on Indian economy and two separate reports on India’s top 100 corporations and top 25 banks. Though largely optimistic about the corporate performance, both S&P and Crisil said the “rate of growth has softened in the past three years as a result of pressure on margins”. With merger and acqusition deals becoming substantive, the agencies feel credit profile of Indian corporations may be affected as they take on large debts to fund these deals.
In a separate report on “India’s Top 25 banks”, both the agencies say Indian banking sector’s resilience to an economic downturn has increased significantly over the last decade. However, the rapid credit growth at 30% over the past years could cause a rise in the non-performing loans. The profitability of banks could also be under some pressure as “a fragmented sector structure and still developing risk management capabilities are constraining factors”.
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First Published: Tue, Mar 06 2007. 02 38 AM IST
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