Home / Politics / Policy /  Moody’s sees India’s June quarter GDP growth at 5.1%

New Delhi: The Indian economy is poised for a revival and may have grown 5.1% in the first quarter of 2014-15, backed by a pick-up in manufacturing, according to Moody’s Analytics.

“Industrial production is growing at a solid pace and should be mirrored in the cyclical upturn in GDP (gross domestic product). Exports and imports have also rebounded. Business investment could surprise on the upside. Confidence lifted with the May election result, and production of capital goods has surged in recent months," Glenn Levine, senior economist at Moody’s Analytics, said in a statement.

India will announce the first quarter GDP numbers on Friday.

The report by the unit of ratings agency Moody’s Corp. says the Indian economy is in the early stages of a slow cyclical upturn.

India’s GDP has grown at less than 5% for two consecutive years, dragged down by slowing investments and a deceleration in consumption growth.

While pointing out that the new government has assumed office at an opportune time when the economy is recovering, the report said that an improving economy, coupled with Narendra Modi’s strong electoral mandate, provided an ideal platform for the Prime Minister to implement his agenda. “Even without much government help, the economy should grow by around 5% this year and close to 6% in 2015," the report said.

The government estimates the Indian economy to grow in the range of 5.4-5.8% in the current fiscal year.

The current growth numbers are still short of India’s growth potential, “which is currently around 6% but could easily lift towards 7% with some modest economic reforms", it said.

The new government has stated its intent to roll out the goods and services tax, which promises to boost GDP by at least 2 percentage points.

It has also moved to introduce labour reforms that will provide a big boost to manufacturing as it will make it easier for entities to do business in India through provisions of flexibility in both hiring and working hours. The government has also moved forward to allow higher foreign investment in insurance and defence. The NDA government has also stated its intent to speed up all clearances for projects, including environment and forest clearances.

Moody’s Analytics’ first quarter GDP growth projection is more conservative than forecasts by some local agencies that are banking on an industrial recovery for better GDP numbers. While rating agency Icra estimates India’s GDP to grow at 5.5% in the June quarter, Kotak Mahindra Bank Ltd expects economic expansion to be in the range of 5.5-5.6%.

“The initial spurt in industrial activity could be attributed to the anticipation of a strong government at the centre. But it will be sustainable only if it is backed up by concrete steps by the new government to address the concerns of industry and revive growth," said Rajesh Chakrabarti, executive director at Bharti Institute of Public Policy and a member of the faculty at the Mohali campus of the Indian School of Business.

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