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Business News/ Politics / Policy/  Reforms needed for India’s sustained growth: Moody’s
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Reforms needed for India’s sustained growth: Moody’s

The Asia-Pacific region will remain a below-trend growth environment through 2016, said Moody's Analytics

Moody’s Analytics said one positive to anticipate in 2016 is further growth in India, which has entered a cyclical upswing as cooler inflation and calmer financial markets allowed the RBI to lower the benchmark repo rate by 125 basis points in 2015. Photo: Bloomberg Premium
Moody’s Analytics said one positive to anticipate in 2016 is further growth in India, which has entered a cyclical upswing as cooler inflation and calmer financial markets allowed the RBI to lower the benchmark repo rate by 125 basis points in 2015. Photo: Bloomberg

New Delhi: Economic reforms in India are necessary to turn its current cyclical upswing in growth into a structural one, research agency Moody’s Analytics said on Thursday.

“Prime Minister Narendra Modi’s government is now working to make this cyclical upswing a structural one, through reforms including a national sales tax. Reforms to create a national market for goods are key to increasing India’s potential growth rate; a common market will help moderate the periodic inflation spikes that require the RBI to keep interest rates high," it said in a report titled Asia Pacific Outlook: Growing Apart.

Attempts to pass the Goods and Services Tax (GST) constitutional amendment bill is stuck in Rajya Sabha over differences with the main opposition party Congress as the Modi government lacks a majority in the Parliament’s upper house.

Moody’s Analytics said one positive to anticipate in 2016 is further growth in India, which has entered a cyclical upswing as cooler inflation and calmer financial markets allowed the RBI to lower the benchmark repo rate by 125 basis points in 2015.

“Monetary easing has helped India enter a cyclical upswing… India overtook China as the region’s fastest growing economy in the first quarter, and lower borrowing costs will provide the basis for even higher GDP growth in 2016," it added.

India’s economy grew at 7.2% in the first half (April-September) of 2015-16 and is expected to clock below 7.5% growth during the full financial year.

The research agency said the Asia-Pacific region will remain a below-trend growth environment through 2016. “Policymakers are on an easing bias but, absent unexpected downside shocks, no large-scale stimulus measures are expected. Governments are instead responding to conditions as needed with various fine-tuning measures. For 2016, the main issues to watch are China’s economic transition, Japan’s battle against deflation, and India’s efforts to reform its economy," it added.

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Published: 10 Dec 2015, 01:02 PM IST
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