New Delhi: Indian economy is expected to pick up pace in 2015 and grow in the range of 5-6%, helped by strong domestic demand, rating agency Moody’s said on Wednesday.

“India will have stronger gross domestic product (GDP) growth in 2015, which we forecast at 5-6%, up from around 5% in 2014," Moody’s said in a report titled—2015 Outlook-Global Credit Conditions.

The country, it said, has benefited from a strong domestic demand base and diversified export markets that give protection from the effects of a slowing Chinese economy and muted growth in the euro zone and Japan. “Employment and consumption are likely to rise in India, and the fall in global commodity prices will help to lower high inflation in the country," Moody’s said.

As per official estimates, economic growth in the current fiscal ending March 2015 would be between 5.4% and 5.9%. The growth had slumped to sub-5% in the earlier two consecutive fiscals. It also projected that corporates would see improved cash flows on account of acceleration in manufacturing activity.

However, Moody’s outlook on the banking system remains negative as it expects poor asset quality to require continued provisioning and strengthened capital buffers. “Our outlook for the Indian banking system remains negative, reflecting high leverage in the corporate sector that will inhibit any meaningful recovery in asset quality, notwithstanding a moderate rebound in economic growth," it added.

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