Azernews.Az

By Bloomberg

Moody’s Investors Service lowered its growth forecast for India, saying below normal rainfall will offset higher government spending.

Gross domestic product will expand about 7 percent in 2015 compared with an earlier estimate of as much as 7.5 percent, the company predicted. It still sees 7.5 percent growth in 2016.

“Looking at the domestic demand factors, those were what we expected to drive growth up,” Atsi Sheth, Moody’s sovereign analyst, told Bloomberg TV India on Tuesday. “We’re adjusting growth down because that hasn’t happened -- the acceleration hasn’t happened as we’d expected.”

Moody’s this month joined central bank Governor Raghuram Rajan in calling for fiscal and regulatory actions to spur Asia’s third-largest economy. An impasse in parliament has stalled crucial bills, putting at risk Prime Minister Narendra Modi’s plan of unifying the states under a national sales tax by an April deadline.

A key risk to Moody’s growth forecast is a slowdown in the pace of reforms “once the least controversial aspects of the government’s plan have been implemented,” Moody’s analysts led by Marie Diron wrote in the report on Tuesday.

The International Monetary Fund predicts India’s economy will grow 7.5 percent in the 12 months through March 2016, compared with a government forecast of 8 percent to 8.5 percent for the same period. The Moody’s forecast is for the calendar year.

Rajan on Aug. 4 left interest rates unchanged at one of the highest levels in Asia as he looks to keep inflation within a 6 percent target for January and then lower it toward 4 percent in the months ahead.

“Barring a large shock to commodity prices or food inflation, we think that the central bank’s inflation targets are achievable,” Moody’s said.