India could easily hit 7% GDP growth rate with modest economic reforms: Moody's

NEW DELHI: The economy is in the early stages of a cyclical upturn and the second quarter GDP figures due later this week are expected to show the beginning of this cyclical improvement for India.

“We expect GDP growth to hit 5.1 per cent in the three months to June. However, this is still well short of potential GDP growth, which is currently around 6 per cent, but could easily lift towards 7 per cent with some modest economic reforms,” says Glenn Levine, Senior Economist, Moody’s Analytics.

India’s new Prime Minister Narendra Modi has taken office at an opportune time. The economy is in the early stages of a cyclical upturn, albeit a slow one, after GDP growth languished under 5 per cent for the better part of two years.

“Even without much government help, the economy should grow by around 5 per cent this year and close to 6 per cent in 2015,” he added.

Levine is of the view that an improving economy, coupled with Modi’s strong electoral mandate, provides an ideal platform from which to implement his agenda.

Last week, even most of the top global brokerage firms such as Deutsche Bank, Barclays, Nomura and Religare have raised their growth estimates for the Indian economy for the quarter ended June 30 and FY16.

These brokerages expect India’s gross domestic product (GDP) to grow 5.6-6% in April-June from the same period a year ago, marking the fastest quarterly growth in nearly two years.

Economists said uptick in industrial output, revival in consumer discretionary demand, pick-up in manufacturing and transportation sectors, and higher coal, cement and power output growth would have given a boost to economic growth, ET reported.

Global brokerage firm Nomura, which sees nearly 15 per cent upside in the Sensex in the next one year, has revised its FY16 real GDP growth forecast to 6.8 per cent YoY vs. 6.5 per cent previously.

“We expect the economy to fire on all cylinders in 2015-16 with a pick-up in private consumption, investment and export demand,” stated a Nomura report, authored by Sonal Varma and Aman Mohunta.