Though downside risks to the economy have receded in recent months, it is likely that the growth engine will continue to sputter until 2015 even if “business-friendly” Narendra Modi becomes prime minister, says a report by rating agency Moody’s analytical arm.
“The May elections offer the chance for better governance, especially if the business-friendly Narendra Modi becomes prime minister, but it will be a long road for the economy...as there is little on the horizon to lift the economy in 2014,” Moody’s Analytics said in a report titled India Underwhelms.
Its senior economist Glenn Levine cited weakness in the real economy as the reason for his pessimism, with third-quarter GDP figures likely to show the economy growing at about 4.8%.
The economy is unlikely to accelerate much in 2014 though the downside risks have receded in recent months with falling inflation and a narrower current account deficit (CAD), he said, adding there is no sign of a lift in the real economy.
From a high of 4.8% of GDP last year, CAD is projected to improve to 2.4% of GDP in 2013-14.
Levine, however, said the economy is better placed to weather the US Fed tapering and other downside risks in 2014. He said the economy is likely to have expanded 4.8% in October-December, which is the same pace as the first two quarters and below the potential growth rate of 6.5-7%, indicating underlying weakness in the real economy.
The government has pegged growth in this financial year at 4.9%, predicting 5.2% growth in the third and fourth quarters. The government will release Q3 growth numbers on Friday.