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Moody’s expects India's economic growth to rebound strongly, pegging GDP growth of 9.3% and 7.9% in fiscal year 2022 (ending on 31 March 2022) and fiscal 2023, respectively. Growing government spending on infrastructure will support demand for steel and cement, Moody's said. Meanwhile, rising consumption, India’s push for domestic manufacturing and benign funding conditions will support new investments, the rating agency said.

India’s rising vaccination rate, stabilizing consumer confidence, low interest rates and higher public spending underpin positive credit fundamentals for nonfinancial companies, Moody’s Investors Service said in a new report.

“India’s steady progress on inoculation against the coronavirus will support a sustained recovery in economic activity. Consumer demand, spending and manufacturing activity are recovering following the easing of pandemic restrictions. These trends, including high commodity prices, will propel significant growth in rated companies’ EBITDA over the next 12-18 months," says Sweta Patodia, a Moody’s Analyst.

However, it added, if new waves of infections were to occur, it could trigger fresh lockdowns and erode consumer sentiment. Such a scenario would dampen economic activity and consumer demand, potentially leading to subdued EBITDA growth of less than 15%-20% for Indian companies over the next 12-18 months, Moody's said. 

In addition, delays in government spending, energy shortages that lower industrial production or softening commodity prices could curtail companies’ earnings. India’s currently low interest rates will reduce funding costs and support new capital investment as demand grows but rising inflation may result in a faster-than-expected increase in interest rates, which would weigh on business investment, it added. 

Moody's outlook for India's rated nonfinancial companies reflects its expectations for fundamental business conditions in this sector over the next 12-18 months

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