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Showing posts with label Moody's. Show all posts
Showing posts with label Moody's. Show all posts
Notwithstanding a sharp cut in the government's growth forecast at the fag end, 2015 will go down as the year when India emerged as the fastest-growing large economy, despite setbacks such as 12 months of negative export growth, another bad monsoon and roadblocks to the far-reaching goods and services tax regime.

In addition to growth, the economy also saw some positives. Global crude oil prices fell to the lowest levels in over a decade, checking the balance of payments from going awry, inflation rate remained more-or-less under control, despite spikes in food prices, and economic reforms got a big push, notably in the form of further opening up of a host of industries to foreign equity.

India's real GDP in the first half of the current fiscal grew at 7.2 percent as per official data, which was slightly lower in comparison to the GDP growth of 7.5 percent in the previous fiscal.

India's external position improved at the same time. Forex reserves are a little above $350 billion in November 2015 as compared to a little over $270 billion in July 2013. Net foreign direct investment (FDI) inflows have increased to $17 billion in the first half of 2015-16 in comparison to $15.8 in the same period last year. The second quarter's current account deficit logged at a level of 1.6 percent of GDP.

However, the global slowdown continued to weigh on exports, which have declined for 12 straight months. The government said this was also pulling down growth but felt the situation would improve in the coming months.

On the fall in the value of the Indian rupee, the finance ministry's mid-term economic review attributed it considerably to the major devaluation of the Chinese Yuan.

The year also began with India's changing the way it calculated its gross do-mestic product under a new series, though the controversy over the changed methodology employed refuses to die down with economists even terming it obscure.

Changing the base year to 2011-12 from 2004-05 in January, the Central Statistics Office said India's real GDP, that is adjusted for inflation, grew by seven percent in the first quarter of this fiscal, slower than the 7.5 percent expansion in the quarter before - but much higher than 6.7 percent registered in the first quarter of the last fiscal.

Mr. Arun Kumar, till recently a professor at Jawaharlal Nehru University here, told IANS that in view of negligible industrial growth, drought-like conditions in past years and no substantial increase in profits and wages, the new numbers fall flat from the point of credibility.

"Even input costs, that are now low with falling oil prices, were not low in the period 2011-12. Let the statistics office show the growth figures for up to 10 years prior to the base year for us to consider the new series seriously," Mr. Kumar said.

The midyear review released this month lowered the economic growth forecast for the current fiscal to the 7-7.5 percent range, from the previously projected 8.1-8.5 percent, mainly because of lower agricultural output due to deficit rainfall.

It also said there may be a need to reconsider next year's fiscal deficit target of 3.5 percent.

"GDP growth has been powered only by private consumption and public investment is a concern. The proposed wage hike for government workers may impact plan for next fiscal." The economy continues to send "mixed signals" over growth, while all economic indicators were not yet aligned in pointing to a higher trajectory of growth, it said.

India's eight core industries, representing major infrastructure sectors, grew at 2.3 percent in the April-September period of the current fiscal, compared to a rate of 5.3 percent in the same period of the previous fiscal - the fall in growth rate caused by lower expansion in electricity, coal and cement sectors and negative growth in steel and natural gas sectors.

Mr. Jaitley's first full union budget also announced an agreement earlier in the year with the Reserve Bank of India (RBI) that it constitute a Monetary Policy Committee to determine by majority vote on the pol-icy rate required to achieve the inflation target.

Meanwhile, RBI Governor Mr. Raghuram Rajan cut the interest rate in January for the first time in nearly two years and followed up with two other reductions to bring down the central bank lending rate to 6.75 percent.

Politics intervened during the year to prevent the enactment of India's most important reform of its indirect tax regime by way of the pan-India Goods and Services Tax ( GST) that the government has targeted for implementing from April next year, because the ruling NDA does not have the numbers to pass the constitution amendment bill in the upper house.
Highlights
  • Real GDP in first half of fiscal grew at 7.2 percent
  • India emerges as fastest-growing large economy
  • Forex reserves of over $352 billion as on the first week of December.
  • FDI inflows increased to $17 billion in the first half of 2015-16
  • Indian basket of crude oils fell below $40 a barrel
  • Foreign investment limits raised in defense, real estate and insurance, foreign equity in railways
  • Retail and wholesale inflation rates rose in November to 5.41 percent and (-)1.9 percent respectively, largely due to an increase in food prices
  • Infrastructure sectors grew at 2.3 percent in the first half of fiscal
  • Government lowers GDP growth estimate for fiscal by one percent to 7-7.5 percent
(Source – The Economic Times, 24-December-2015)
“Healthy 7.5 percent GDP growth for India for the fiscal year ending March 2017 (FY2017) and a pick-up in manufacturing activity will be broadly supportive of business growth,” said Mr. Vikas Halan, a Moody’s vice-president and senior credit officer.

Most non-financial corporates Moody rates in India (Baa3 positive) will benefit from strong domestic growth and accommodative monetary policy, although weak global growth and a potential U.S. rate hike will weigh on businesses, said Moody’s 2016 outlook presentation for Indian non-financial corporates.

However, according to Mr. Halan, the corporations will also remain vulnerable to the volatile Indian rupee as against the U.S. dollar and to low commodity prices, which has in turn led to a sharp decline in external trade.

“The Modi administration so far this year has been unable to enact legislation on key reforms, including a unified goods and services tax and the Land Acquisition Bill. It seems highly unlikely that the major reforms will get enacted by the upper house of the Indian parliament where the ruling coalition is in minority. A failure to implement these reforms could hamper investment amid weak global growth,” said the report.

The fall in commodity prices has benefited many Indian corporates given the country’s status as a net importer of raw materials and its recent history of high inflation.

The resultant moderating inflation should result in lower borrowing costs for corporates and yields on corporate bonds, says Moody’s.

By sector, Moody’s expects upstream oil and gas companies to benefit from lower fuel subsidy burdens, although low crude and domestic natural gas prices will continue to hurt profitability. Refining and marketing companies, meanwhile, should benefit from healthy margins as demand growth outpaces expected capacity additions.

Moody’s negative outlook for the steel industry reflects elevated leverage and an extended period of low prices due to continuing steel imports, while the negative outlook for metals and mining companies reflects bleak global commodity prices.

In the real estate sector, Moody’s expects demand to improve in 2016 on the back of lower interests rates, although approval delays could push back project launches for property developers.

In the auto sector, Moody’s expects retail sales volumes to grow 6 percent in 2016 on the back of sus-tained growth in passenger vehicles sales and a recovery in commercial vehicle sales.

The telecom companies that Moody rates in India have reported improved revenue per user (ARPU) and EBITDA margins. However, competition remains intense and the regulatory framework continues to evolve.

(Source – The Hindu, 26-November-2015)
NITI Aayog’s vice-chairman Mr. Arvind Panagariya on Friday exuded confidence that India could be an $8-trillion economy within next 15 years or even less if it continues with growth-enabling policies.

"The prospects for our economy to become the third largest one in the world in less than 15 years are excellent today," Mr. Panagariya said while delivering the 6th R.K. Talwar memorial lecture on 'Growth, Poverty and Economic Trans-formation', organized by the Indian Institute of Banking & Finance.

Mr. Raj Kumar Talwar was one of the most successful Chairmen of the SBI. He led the bank from 1969 to 1976.

The World Bank and the IMF as well as many analysts have predicted that the country would become the third largest economy after China and the US with a GDP of $10 trillion by 2030.

"Our savings rate remains nearly 30 percent of the GDP and has prospects to rise above 35 percent, a level reached in 2007-08. We have a young population so that labor shortages will not be an impediment to growth," Mr. Panagariya said, adding our very low per-capita income leaves us far away from the global technology frontier.

Describing the late Mr. Talwar as "the rarest of rare officers that we have ever produced," he said the late banker was so "spotless in his personal and professional life that even an all-powerful Emergency-era government, determined to remove him from office for refusing to do its unjust bidding, could not muster enough courage to do so.

"Even after a CBI inquiry and a legislative amendment later, the then government could only bring itself to asking Mr. Talwar to take a leave of absence for the last 13 months of his tenure," he recalled.

Stating that only the higher growth can lead to poverty reduction, he said during the first three decades, the economy grew at a snail's pace with per-capita income rising just 50 percent by 1980-81. In the following decade, there was some acceleration with another 50 percent added to the original per-capita income by 1990-91.

The 1990s saw further acceleration, adding full 100 percent over the 1950-51 income. The fastest gain came in the new millennium, however, with full 300 percent added to the original per-capita income. Movements in poverty mirrored these movements in per-capita income, he said.

With extremely low initial per-capita income, slow growth meant that per-capita income remained low and no perceptible assault on poverty could be done, he argued.

"Once growth picked up, however, per-capita income rose and poverty too began to recede. The sharper the rise in incomes the sharper was the decline in poverty.

Poverty fell more sharply in rural areas thereby partially bridging the gap in poverty between the two regions. The association between growth and decline in poverty is unmistakable," he con-cluded.

(Source – Assorted with the Inputs from PTI)

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India's economic landscape is expected to undergo a major transformation over the next decade and is likely to achieve an average growth rate of around 8.8 percent, a Dun & Bradstreet report says.

According to the report, this increase in growth rate would culminate into high per capita income over the years.

"We believe India has the potential to achieve a higher growth rate, given its domestic fundamentals, D&B said in a report titled 'Manufacturing India 2025' which outlines the country's growth journey during the next decade. We expect India to realize its potential and achieve an average growth rate of around 8.8 percent during the next decade," it said adding that with this, India's nominal GDP is expected to touch $3.4 trillion by 2019-20 fiscal and further to around $7.0 trillion by 2024-25 fiscal.
The report, however, cautioned that in case of a delay or failure to implement key policy reforms, nominal GDP might reach to $6.2 trillion by 2024-25.

The new mode of governance, a pro-business policy framework, improved business environment through simplifying processes, focus towards decentralized planning and greater empowerment of states, the demographic dividend and the rise of the middle class have enabled India to emerge as one of the global economic powers on the world map, the report said.

The report further said while services sector would continue to drive India's growth momentum, the industrial sector is expected to witness double-digit growth.

Along with 'Make in India' Programme, other initiatives such as Digital India, developing Smart Cities and urbanization if implemented conscientiously will change the dynamics of Indian economy in next decade, Dun & Bradstreet India Senior Economist Mr. Arun Singh said.

The report further said the goal of raising the share of manufacturing to 25 percent of GDP would require conducive business environment, investment to support innovation, capital and labor efficiency amongst other measures.

Besides improvement in industrial and ICT infrastructure, strong supply chain and competitive infrastructure, focus on health and skill development are required which will not only support industrial development but also other segments of the economy, it added.

(Source – Assorted with the Inputs from PTI)

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India’s gross domestic product (GDP) likely grew around 7.3 percent in the July-September quarter, up from 7 percent in the first quarter of FY16, but it remained below the country’s potential, Moody’s Analytics said on Friday.

Though India’s potential is around 9-10 percent GDP growth, it said closing the negative output gap is dif-ficult as external headwinds are blowing stronger and the government has failed to deliver promised reforms.

“We believe GDP will grow at 7.6 percent this year and in 2016,” it said. Key economic reforms including in land acquisition, a national goods and service tax, and revamped labor laws, would help the country deliver higher GDP growth, it said. The World Bank on Thursday retained growth forecast for India at 7.5 percent for this year citing a pick up in investment due to higher capital expenditure by the Centre. In-dia’s GDP grew by 7.3 percent in FY15.

However, Moody’s cautioned that getting the Rajya Sabha nod to some of the key reforms could get ob-structed by an “obstructionist” opposition as recent controversial comments from ruling-Bharatiya Janata Party members won’t help the government’s cause. The ongoing state election in Bihar-

On the other side, the Reserve Bank of India has helped kick-start the economic recovery by cutting the repo rate by 125 basis points this year. Banks have also started passing the rate cut benefits to consumers. Further rate cuts in 2015 are unlikely, Moody’s said.

While global market sentiment has been down, Indian equities have also suffered from a loss in domestic sentiment. Bank balance sheets are still reeling from the economic slowdown in 2013. Profits slumped earlier in the year, and nonperforming loans hit a 14-year high. Thus, banks have been reluctant to expand investment. This explains the little sign of an upward trend in credit growth this year.

There are also indications that investors have been less optimistic about India’s economic prospects. Net financial flows into equity were around $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. The RBI is consistently looking to improve India’s banking and financial structures. “We believe a move towards full capital account liberalization is inevitable in India. This will likely occur in the next two to four years. A freer capital account will give Indian companies greater access to overseas markets, lower borrowing costs, and facilitate credit growth—a key ingredient to increasing investment,” it added.

one of India’s largest and poorest states-could prove pivotal to (prime minister) Mr. Modi’s leadership, it said. A win, would help the ruling party secure a majority in the Rajya Sabha. Unlike in the Lok Sabha, the GST bill is held up in the Rajya Sabha as the government does not have a majority in the upper house.
  • Moody’s Analytics Says
  • Low interest rates will buttress Indian economy in the short term, but reforms are needed to reach long-term potential growth.
  • Better political outcomes could help India achieve reforms
  •  Financial market sentiment has faded; the stock market and foreign inflows are down
  • External headwinds are growing stronger and are hurting India’s exporters
  • Further rate cuts in 2015 are unlikely, but there is room for more next year.

(Source – The Financial Express, 20-October-2015)   
India has moved up one position to become the world’s seventh most valued ‘nation brand’, with an increase of 32 percent in its brand value to USD 2.1 billion.

The US remains on the top with a valuation of USD 19.7 billion, followed by China and Germany at the second and the third positions respectively, as per the annual report on world’s most valuable nation brands compiled by Brand Finance.

The UK is ranked 4th, Japan is at fifth position and France is sixth on the list. While India and France have moved up one position each since last year, all the top-five countries have retained their respective places. However, the surge of 32 percent in India’s ‘nation brand value’ is the highest among all the top-20 countries on the list.

China has retained its second position despite a decline of one percent in its brand value to USD 6.3 billion. Brand Finance said it measures the strength and value of the nation brands of 100 leading countries using a method based on the royalty relief mechanism employed to value the world’s largest companies.

The nation brand valuation is based on five year forecasts of sales of all brands in each nation and follows a complex process. The Gross domestic product (GDP) is used as a proxy for total revenues.
The report also said that India’s ‘Incredible India’ slogan has worked well, while Germany suffered due to the Volkswagen crisis. About the US, the report said it remains a powerful brand with an inviting business climate.

“However its value comes in large part from the country’s sheer economic scale… The US’ world-leading higher education system and the soft power arising from its dominance of the music and entertainment industries are significant contributors too. This soft power will help the US to retain the most valuable nation brand for some time after China’s seemingly imminent rise to become the world’s biggest economy,” it added.

The study further said that China’s recent stock market turbulence and slowing growth will also extend the US’ tenure of the top spot. Among the BRICS nations, India is the only country to have witnessed an increase in its brand value with all others – Brazil, Russia, China and South Africa – seeing a dip in their respective brand valuations.

India is the second most valued among these emerging economies after China, followed by Brazil, Russia and South Africa.

(Source – Assorted with the Inputs from PTI)

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Rating agency Moody’s said India is less exposed to global risks among emerging market economies because of its more resilient economic growth and the impact of positive policy reform momentum.

A Moody’s report says trends in global capital flows have caused Brazil and Turkey to register the sharpest exchange rate depreciation and loss of reserves in the first half of 2015, while India proved comparatively resilient to these market developments.

Emerging market (EM) sovereigns have diverging shock-absorption capabilities to withstand the risks that will continue to impact global credit quality in 2015-16, the report said.

Moody’s said the main external risk facing EMs is the potential for a prolonged risk aversion, prompted by hopes of normalization of the US monetary policy and possibility of a sharper-than-expected slowdown in China’s growth.

The report focuses on five Baa-rated sovereigns — Turkey, Brazil, South Africa, India and Indonesia.

“India is less exposed to external shocks than the other sovereigns discussed here. The positive outlook on its Baa3 rating reflects our view that the relatively resilient growth and the policy reform momentum will slowly stabilize inflation, improve the regulatory environment, increase infrastructure investment and lower government debt ratios,” it said.

“In contrast, we forecast strong growth in India of around 7-7.5 percent per year in 2015-16, the highest among the G20 economies, which is supported by lower oil prices that will reinforce gradual growth enhancing reforms,” it said.

Moody’s said although India, South Africa and Brazil had weaker fiscal positions than Turkey and Indonesia, these governments were less reliant on foreign currency and non-resident funding (government external debt).

The rating agency made a special mention of India’s significant monetary tightening in 2013, coupled with some fiscal consolidation, which is “an example of effective macroeconomic management that restored macroeconomic stability, albeit at the expense of near-term growth”.

(Source – Assorted with the Inputs from PTI)

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