Moody’s pegs India’s GDP growth rate higher at 5.5%

[Ulhas Joglekar]

NOV 29 1999 The Economic Times Online
Moody’s pegs India’s GDP growth rate higher at 5.5%
Yassir A Pitalwalla
MUMBAI 27 NOVEMBER
CLOSE on the heels of raising India’s Ba2 sovereign foreign currency rating
outlook to positive from stable, international rating agency Moody’s
Investors Service (Moody’s) has upped the projections for India’s real GDP
growth rate for the current fiscal from 4.5 per cent to 5.5 per cent.
Moody’s move stems from expectation that the current government will last
longer and its belief, now, that political leaders across the spectrum are
convinced that fundamental reform is needed to resuscitate growth.
Moody’s has also drastically cut its forecast for the consumer price
inflation rate for the year ’99-’00 from the previous level of 12 per cent
in December ’98 to five per cent now. The rate forecast for growth of
industrial production by the agency has meanwhile been doubled from three to
six per cent.
Moody’s has lowered the forecast for the foreign currency debt to gross
domestic product ratio from 23.70 to 21.50 per cent. Current account balance
balance to gross domestic product (GDP) figure is forecast to be at a much
lower -1 per cent from -3.70 per cent earlier. The agency has also forecast
a trade balance to GDP of -3.50 per cent, down from -6.10 per cent forecast
earlier.
For the fiscal year ’00-’01, the agency has forecast an even higher real GDP
growth rate of six per cent with a lower foreign currency debt to GDP ratio
of 21.1 per cent. The earlier forecasts by Moody’s were based on the
deteriorating state of public finances and external trade balances which the
agency felt were difficult to correct, given the divisive conditions that
plagued the political environment then.
In December ’98, the agency had said that attracting foreign capital inflows
required an extended period of regional as well as domestic political
stability.
“The introduction of a coherent, growth inducing policy framework immune to
electoral considerations and fluctuations is all the more crucial to
accelerate growth and development,” the agency had then said.

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