India’s growth is dependent on countering domestic obstacles than global factors, ratings agency Crisil said Thursday.
“The Indian authorities’ efforts to contain its high fiscal deficit and inflation, limit its ability to generously use counter-cyclical policy tools to boost the economy,” said Crisil’s chief economist Dharmakirti Joshi wrote in a report.
“Weak demand, low capacity utilization, and high leverage are impediments to reviving the private corporate investment cycle.”
India’s economy grew by at a lower-than-expected rate of 7% during the first quarter of current fiscal.
In its monetary policy review on September 29, the Reserve Bank of India has lowered its economic growth forecast to 7.4% for the current fiscal through March 2016, from its earlier prediction of 7.6%. The finance ministry officials have also accepted that the economy would grow at above 7.5% from an earlier optimistic projection of 8-8.5%.
The Crisil report noted that global developments since 2014 have had a mixed impact on the Indian economy.
While lower crude oil and commodity prices have helped to rein in fiscal and current-account deficits and inflation, slack global growth has hurt India’s exports.
Reforms aimed at enhancing financial sector access to the unserved and underserved, improving transparency in government decision-making, and making it easier to do business would play an important role in pushing growth up over the next two to three years, the report said.
The transition to a sustainable high growth path over the next decade would also require additional reforms such as a goods and services tax, along with land and labor reforms, it said.