Moody’s to Modi: Rein in members or risk losing credibility
New Delhi: Against the backdrop of controversies like on beef, Moody’s Analytics on Friday cautioned Prime Minister Narendra Modi that the country may lose domestic and global credibility if he doesn’t rein in the members of his party.
In a report titled India Outlook: Searching for Potential, Moody’s Analytics said for the country to reach its growth potential it has to deliver the promised reforms.
The ruling BJP does not have a majority in the Rajya Sabha and crucial reforms bills has been met with an obstructionist opposition.
It projected that India’s GDP growth for September quarter at 7.3 per cent, while for the full fiscal it would be 7.6 per cent.
As regards interest rates, it said low rates will buttress the economy in the short-term but reforms are needed to reach long-term potential growth.
The Reserve Bank kick-started the recovery by cutting the repo rate by 1.25 per cent this year.
It said positive signs are emerging with the State Bank of India, the nation?s largest bank, cut its base lending rate earlier this month.
Moody’s Corporation, projected the RBI to keep rates on hold for the remainder of 2015, with a small chance of another cut early next year.
It, however, cautioned that Indian equities have suffered loss in global and domestic investors.
Narendra Modi-led government assumed office in May 2014.
As regards the impending US rate hike, it said: “The rupee will likely come out relatively unscathed thanks to the RBI’s bulging foreign exchange reserves stockpile.”
The slowdown in global growth will prove a major headwind for Indian exporters, Moody’s said, adding that the fall in exports from 2015 is expected to continue in 2016.
Moody’s Analytics said there are indications that investors have been less optimistic about India?s economic prospects. Net financial flows into equity were around USD 16 billion in 2014.
However, they are unlikely to reach those highs this year. The same can be said about financial flows into India’s debt market, it added.
RBI is consistently looking to improve India’s banking and financial structures, Moody’s said, adding We believe a move towards full capital account liberalisation is inevitable in India.
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Source:Zeenews
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