India’s growth outlook dim despite stability: Moody’s

May 21st, 2009 - 5:54 pm ICT by IANS  

Sensex New Delhi, May 21 (IANS) Despite the political stability promised by the Congress-led coalition’s resounding win at the recent parliamentary polls, the outlook remains dim for the Indian economy till 2010, says the economic intelligence arm of global rating agency Moody’s.
“The robust export performance seen in the December quarter likely turned negative in the opening months of 2009,” Sharman Chan, economist with Moody’s, said Thursday.

“Moody’s expects year-on-year GDP growth to have decelerated from an already-disappointing 5.3 percent for the December quarter to 4.5 percent for the March quarter, taking the fiscal 2008-2009 expansion to about 6.3 percent,” Chan said.

Maintaining that “India’s economic woes are not over” though the general election results have buoyed market sentiment this week, she warned: “A solid recovery is not expected until 2010.”

According to her, “the cash-strapped Indian government may not be able to increase spending if the economic environment deteriorates, making policy reform the new focus in improving India’s economic prospects”.

However, Chan acknowledged that investor confidence had definitely strengthened after the election outcome was announced, with the Sensex and rupee both surging as India’s longer-term outlook has “brightened”.

At the same time, she noted: “The upbeat sentiment in India may fade when the March quarter GDP (gross domestic product) numbers are released next week. Although India has not been crippled by the global turmoil in the same way as its more externally oriented Asian neighbours, it has still been hurt in various aspects.”

As the global recovery hinges on development in the US, India’s GDP growth for 2009-2010 will likely further decelerate to about 5 percent, Chan added.

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