Mumbai: The growth of the Indian economy will pick up slightly to near 7.5% in 2016 and 2017, but private investment remains weak, Moody’s Investors Service said on Thursday.
“India, as a net importer of commodities, has benefited from falling prices and growth will be driven by rising consumption. However, a sustained improvement in domestic private investment would be required for the growth momentum to be sustained,” the American agency said in its Global Macro Outlook 2016-17.
It said growth will pick up slightly, climbing to 7.5% in 2016 and 2017, from 7.3% in 2015.
“Weak global growth has meant a 9% year-over-year decline in total exports in real terms in 2015 Q4, after declining by an average annual rate of 5.6% in the first three quarters of 2015,” it said.
Official data last week showed India’s merchandise exports in April were valued at $20.57 billion – down 6.74% in dollar terms against $22.05 billion in the like month of last year, signalling a decline for the 17th straight month.
Further, investment spending fell in the last quarter of 2015 as did industrial production, while capital utilisation rates remain low, the report added.
“Private spending will be supported by the implementation of the public sector salary increases, mandated by the 7th Pay Commission, and a rise in rural incomes, provided the forecast of a good monsoon is realised,” Moody’s said.
Data last week also showed that growth of India’s manufacturing, which has the maximum weight in the overall index of industrial production (IIP), actually fell by 1.2% in March after rising in February.
According to the report, weak growth in emerging markets, driven by low commodity prices and waning export demand, will continue to weigh on the global economy this year.