Moody's expects India to grow 7.5% in FY16, highest in G20

India growth story received an impetus today when rating agency Moody's said it will grow at a strong pace of 7.5 per cent in 2015-16, the highest among G20 economies, helped by the reforms drive and lower oil prices.

"We forecast strong growth in India... at 7.5 per cent in 2015-16, the highest among the G20 economies.

Lower oil prices will reinforce gradual growth-enhancing reforms to support robust economic activity over the forecast period," Moody's Investors Service said, in a report.

At a time of shifting global investment flows, India benefits from reduced external imbalances, it said. "We expect a broadly balanced current account, for the first time in 10 years, thanks to lower energy import bill and restrictions in gold imports," Moody's said.

It said India would be a major beneficiary of softer oil prices among the G20 economies as the country is a major crude importer.

G20 is a group of 20 developing and industrialised economies, which accounts for 85 per cent of the world's economic output.

Furthermore, the 'Make-in-India' campaign to boost domestic manufacturing and other reforms measures would bring in higher investment and boost growth, the rating agency said.

"If implemented as intended, these reforms and the wide support for business-friendly policies will help achieve higher investment growth than in 2013-14," Moody's said.

It said the targeting of inflation by the Reserve Bank (RBI) would ensure that higher inflation on food products does not spill onto other goods, services and wages.

"We forecast that ongoing moderate inflation will enable better planning of investment."

"Lower inflation will also raise real incomes, profits and overall GDP growth," it said.

According to the road map, RBI intends to lower retail inflation to 6 per cent by January 2016 and 4 per cent (+/- 2 per cent) thereafter.

Photograph: Reuters