The Indian economic growth of 7.3% in the last quarter of 2015 was mainly due to domestic demand. This includes the agricultural and services sector. This indicates that the growth of Indian economy did not rely too much on external demand. This trend is expected to carry on in 2016 as well, said Commerzbank in a research report.
“Our forecast for FY2016/2017 (1-April to 31-March) and FY2017/2018 are below consensus because of downside risks to investment spending and the slow progress on major reforms because the Modi government lacks a majority in the Upper House of parliament”, added Commerzbank.
However, there are certain optimistic signs that might underpin economic growth. The RBI’s pro-growth stand of lower rates by 125bp last year is one of the positive signs. The central bank has taken a practical approach to underpin growth given the deceleration of inflation. Moreover, Moody’s upgraded the outlook in April 2015 to positive from stable and confirmed the rating of Baa3. It also stressed that if the institutional reforms, growth stabilizing policies and growth enhancing progress, an upgrade is likely.
