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India may lose credibility if PM Modi fails to rein in BJP members: Moody’s

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Chennai: Cautioning Prime Minister Narendra Modi, Moody’s Analytics on Friday said that the country may lose domestic and global credibility if he does not rein in the members of the ruling BJP.

The research firm, whose parent runs global rating agency Moody’s, said controversial comments from various party members amid the raging beef controversy is not helping the government.

“While PM Modi has largely distanced himself from the nationalist gibes, the belligerent provocation of various Indian minorities has raised ethnic tensions,” said Moody’s Analytics.

The ruling BJP does not have a majority in the Rajya Sabha, where crucial reforms bills have been met with an obstructionist opposition, it noted.

In a report titled ‘India Outlook: Searching for Potential’, Moody’s Analytics, a division of Moody’s Corporation, said:

“Along with a possible increase in violence, the government will face stiffer opposition in the upper house as debate turns away from economic policy.”

Moody’s Analytics, a top economic policy research and analysis institution, said the politics need to improve and the government’s reform agenda needs attention to achieve long-term growth.

While the government met with obstructionist opposition in the upper house with regard to crucial reform measures, the ruling party also hasn’t helped itself with controversial comments by its members, Moody’s Analytics said.

The Indian economy is likely to grow at 7.6 percent this year and in 2016 while closing of negative output growth is going to be difficult due to external headwinds and the government failing to deliver on reforms, it added.

“Overall, it’s unclear whether India can deliver the promised reforms and hit its growth potential. Undoubtedly, numerous political outcomes will dictate the extent of success.”

According to the report, the Indian economy is expected to grow around 7.3 percent year-on-year in September quarter which is below the expected potential of around nine or 10 percent.

Expecting the gross domestic product (GDP) to grow at 7.6 percent this year and 2016, Moody’s Analytics said key economic reforms like goods and service tax, revamped labour laws and land acquisition bill would improve India’s productivity.

According to the report, low interest rates will help the economy in the short term and the financial market sentiment has faded. Further rate cuts in 2015 are unlikely, but there is room for more next year.

The Indian stock market and the foreign inflows are down while the strong external headwinds-slowdown in global growth are hurting Indian exporters.

Moody’s Analytics expects Indian exports continue to fall in 2016 while the newfound stability in India’s current account balance could come under renewed stress if global growth slows more.

“So far, lower oil prices have buttressed the trade balance. But a rebound in prices if oil supply re-balances could see the trade balance deteriorate,” the report adds.

According to Moody’s Analytics, indications are there on foreign investors turning less optimistic about India’s economic prospects.

“Net financial flows into equity were around $16 billion in 2014. However, they are unlikely to reach those highs this year. The same can be said about financial flows into India’s debt market,” the report said.

A move towards full capital account liberalisation is inevitable in India and this may happen in the next two to four years.

“A freer capital account will give Indian companies greater access to overseas markets, lower borrowing costs, and facilitate credit growth – a key ingredient to increasing investment,” Moody’s Analytics said.

(With inputs from agencies)

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Big reforms made India fastest growing major economies globally: Garg

It also has enormous implications for emerging markets and developing countries

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The RBI building in Mumbai. Photo credit: AFP/Sajjad Hussain

The major reforms undertaken by the Indian government for raising economic growth and maintaining macroeconomic stability have made the country one of the fastest growing major economies in the world, said Subhash Chandra Garg, Secretary, Department of Economic Affairs (DEA).

Garg was addressing the Special Event hosted by US-India Strategic Partnership Forum on ‘Indian Economy: Prospect and Challenges’ in Washington D.C on Friday.

Indian economy needs big reform.

He said the launch of the Goods and Services Tax (GST) represented an “historic economic and political achievement, unprecedented in Indian tax and economic reforms, which has rekindled optimism on structural reforms.” He further emphasized that India carried-out such major reforms when the global economy was slow.

“With the cyclical recovery in global growth amid supportive monetary conditions and the transient impact of the major structural reforms over, India will continue to perform robustly,” Garg said.

During his meetings, Garg highlighted that the digital age technologies have profound implications for policies concerning every aspects of the economy. It also has enormous implications for emerging markets and developing countries.

Also Read: Biggest Bank Frauds Which Shook The Indian Economy

He expressed that the response to such a transformation will have to shift from ‘catch up’ growth to adoption/adaption of digital technologies for development and growth.

Garg also informed that India has started adopting policies and programmes for transforming systems of delivery of services using digital technologies and connecting every Indian with digital technologies and access through Aadhaar and other such means.

Indian economy should be on rise. www.mapsofindia.com

While citing the example of expanding mobile data access, he mentioned that India is now the largest consumer of mobile data in the world with 11 gigabytes mobile data consumption per month. He informed that India is investing in digital technologies, encouraging private sector to adapt these technologies and also addressing the taxation related issues by introducing equalisation levy.

Garg is currently on an official tour to Washington D.C. to attend the Spring Meetings of the International Monetary Fund and the World Bank and other associated meetings. He is accompanied by Urjit Patel, Governor, Reserve Bank of India and other senior officials. IANS