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After S&P retained the lowest investment grade for India a week back, Moody's Analytics, in a statement on Thursday, said that the Indian economy is growing below its potential.
It said, "The government believes India can grow at an 8% pace if everything goes according to script. We think this is unlikely, seeing India’s potential growth rate at around only 7%; anything higher will fan inflation."
Prime Minister Manmohan Singh, on the occasion of 9 years of completion of the UPA Government on Wednesday, affirmed that if bought to power in 2014, the 8% growth rate could be achievable.
"Though 8% growth is difficult, it is not impossible. We have done it before, and if we receive a mandate next year, we will certainly achieve it once again", he had said.
On another note, Moody's Analytics said that the reforms bought in by the Government recently could set the pace for growth later this year.
"The government’s economic reforms through the second half of 2012, coupled with lower interest rates, should lift India's growth pace through the second half of 2013, but it will be some time before the economy is expanding at its potential rate.", it said, further stating that the days of 8% annual GDP growth in the country are "long gone”.
It added, "GDP growth should steadily improve across 2013, initially as stalled investments are restarted and then later as sentiment starts to improve, lifting investment and consumer spending. Yet the recovery will be gradual, with GDP growth hitting a pace just above 6% by the end of this year"
Terming reform measures such as FDI in aviation and retail as welcoming moves, it said, "These demonstrate that the government is pro-growth. But it is not yet clear that this will be enough to lift investment in 2013 and 2014. Global businesses are no longer willing to overlook the difficulties of doing business in India. In a more skeptical investment environment, the government’s efforts, including lower interest rates, may only have only a marginal impact on sentiment and investment."
