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Lok Sabha Election Results: Moody's predict slow fiscal reforms as India returns toward coalition government

Earlier in fiscal 2023-24, India's real GDP accelerated to 8.2 per cent from 7.0 per cent in the previous year. It is driven by gains in gross fixed capital formation as the government's infrastructure program gained further traction even as private consumption remained subdued.

Edited By: Shubham Bajpai New Delhi Updated on: June 05, 2024 16:14 IST
Moody's predict slow fiscal growth
Image Source : INDIA TV Moody's predict slow economic and fiscal reforms after NDA gets slim majority

Moody’s Ratings on Wednesday suggested that the slim majority won by the BJP-led National Democratic Alliance's (NDA) in Lok Sabha will likely delay far-reaching economic and fiscal reforms that could impede progress on fiscal consolidation.

"We expect policy continuity, especially with regards to budgetary emphasis on infrastructure spending and boosting domestic manufacturing, to support robust economic growth”, said Moody’s in a note. However, it added "However, the NDA's relatively slim margin of victory, as well as the BJP's loss of its outright majority in parliament, may delay more far-reaching economic and fiscal reforms that could impede progress on fiscal consolidation." 

According to the rating agency, India’s fiscal outcomes will remain weaker than Baa-rated peers, despite financial budget for fiscal year 2024-25 to be released in the next few weeks which will provide some indications of India's fiscal policy through 2029.

Retardation in Real GDP but policy continuty expected

Moody’s has also predicted retardation in real GDP back to 7.0 per cent for almost three years, which accelerated to 8.2 in fiscal year 2023-24. However, it included factors such as rise in medium term because of potential growth in infrastructure development and digitisation. 

Is said, “Our assessment of India's economic strength incorporates real GDP growth of around 7 per cent over the three-year period between fiscal 2023-24 through 2025-26, while factoring potential upside over the medium-term resulting from improvements in productivity and potential growth on the back of traction on infrastructure development and digitalization."

Emphasising the unemployment, weak productivity and challenges in agri sector, Moody’s said that these factors constrain the growth potential in near-term. However, it has predicted that India will grow faster than all other G20 countries through FY26. It must be noted that India is returning towards coalition government at centre following 10 years of full-majority government. BJP on its own won 240 seats, 32 short of majority. However, its coalition NDA clinched 293 seats ensuring a third term for PM Modi.

(With PTI Inputs)

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