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 per cent.
“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 per cent of GDP last year, CAD is projected to improve to 2.4 per cent 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 per cent in October-December, which is the same pace as the first two quarters and below the potential growth rate of 6.5-7 per cent, indicating underlying weakness in the real economy.
The government has pegged growth in this financial year at 4.9 per cent, predicating 5.2 per cent growth in the third and fourth quarters. The government will release Q3 growth numbers on Friday.