India Might Not Be Able To Sustain Record-Breaking Growth

Jan. 16, 2007
Moody's says deficit and infrastructure issues might halt growth rate.

India's economy is unlikely to continue growing at over 9% due to its hefty fiscal deficit and creaky infrastructure, global credit rating agency Moody's Investors Service said on Jan. 16. "GDP growth has been impressive but it is unlikely to go on at this pace beyond a year," Moody's vice president Kristin S. Lindow said. "The government will have to resolve fiscal deficits ... and boost private-sector participation in the infrastructure sector."

India's economy grew by 9.1% during the first half of the financial year to March 2007, making it the world's second-fastest growing after China.

India's combined fiscal deficit of the federal government and states stands at around 11% of GDP, according to World Bank figures. India's public sector could only fund a small portion of its infrastructure needs, Lindow said. "Much of India's infrastructure is of poor quality and requires enormous amounts of capital for improvements to sustain its economic expansion," the agency said in a report.

Despite rising inflation, she said she did not expect a sharp upward move in rates. "Monetary policy has been tightening gradually for more than two years," she said. "We do not expect a hard landing as India's central bank may prefer to accommodate the growth momentum without choking it off completely."

Local analysts expect the Reserve Bank of India to raise its reverse repurchase rate, the rate paid for deposits from commercial banks, by a quarter of a percentage point to 6.25% in its next review on January 31.

Copyright Agence France-Presse, 2007

Popular Sponsored Recommendations

Empowering the Modern Workforce: The Power of Connected Worker Technologies

March 1, 2024
Explore real-world strategies to boost worker safety, collaboration, training, and productivity in manufacturing. Emphasizing Industry 4.0, we'll discuss digitalization and automation...

3 Best Practices to Create a Product-Centric Competitive Advantage with PRO.FILE PLM

Jan. 25, 2024
Gain insight on best practices and strategies you need to accelerate engineering change management and reduce time to market. Register now for your opportunity to accelerate your...

Transformative Capabilities for XaaS Models in Manufacturing

Feb. 14, 2024
The manufacturing sector is undergoing a pivotal shift toward "servitization," or enhancing product offerings with services and embracing a subscription model. This transition...

Shifting Your Business from Products to Service-Based Business Models: Generating Predictable Revenues

Oct. 27, 2023
Executive summary on a recent IndustryWeek-hosted webinar sponsored by SAP

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!