India’s growth outlook has improved, with credit ratings agency Moody’s raising its real GDP growth forecast for the current financial year to 7% from 6%, reported Reuters.
The agency said the revision reflects the resilience of India’s economy despite disruptions caused by the conflict in the Middle East. It also maintained that India is expected to grow faster than all other G-20 economies and similarly rated emerging market sovereigns.
Despite the stronger growth outlook, Moody’s warned that risks remain.
It said elevated energy prices and food price pressures linked to El Nino could push up inflation and affect consumer spending and economic growth.
Higher global energy prices could also increase the government’s subsidy burden and create pressure for additional support measures, the agency said.
Moody’s said India’s fiscal policy response to the shock from the Middle East conflict had been muted.
However, higher energy costs could lead to increased subsidy spending. At the same time, rising defence expenditure and continued investment in infrastructure could limit the pace of fiscal consolidation.
The agency expects India’s fiscal metrics to improve gradually over the medium term, supported by strong nominal GDP growth.
India’s economy grew 7.8% in the April-June quarter, according to government data released last month.
The growth came in comfortably above expectations, with a rise in investment and manufacturing activity helping offset weakness in mining and consumer-facing services.
Moody’s continues to expect India to grow faster than other G-20 economies and similarly rated emerging market sovereigns.