NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News  » Business » Growth prospects weak, little chance of improvement in 2014

Growth prospects weak, little chance of improvement in 2014

December 18, 2013 08:10 IST

Global rating agency Moody's said India's economic growth remains weak and there is little chance of recovery next year.

"Complicated taxes and regulations, weak infrastructure, and a weak central government weigh on confidence and demand. This will turn around eventually, but not in 2014, keeping GDP growth below potential," Moody's said in a report.

The May elections open possibility of better governance, it said.

Monetary policy over the past three years has been at best ineffective and at worst counter productive, but this is changing under the new central bank head, Moody's said.

RBI Governor Raghuram Rajan has made lower inflation the central bank's primary goal, meaning further rate hikes are likely in the near term, it added.

Rajan, who delivered two repo rate hikes of 0.25 per cent each in as many policy reviews since he took over on September 4,

had mentioned that he considered fighting inflation as the central bank's "key responsibility."

RBI is expected to raise repo rate once again tomorrow by 0.25 per cent in its bid to tame inflation.

Wholesale Price Index inflation in November climbed to a 14-month high of 7.52 per cent as prices of food items such as onions and potatoes surged. Consumer price inflation touched a nine-month high of 11.24 per cent last month.

India's current account deficit has narrowed, for example, which should mute the impact of Fed policy on the rupee. Moody's expect less financial volatility in 2014, but this outlook is uncertain.

Financial shocks are by definition unforeseen, and even if the source is unknown, some volatility should be anticipated given the parlous state of global recovery, it said.

© Copyright 2018 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.