Moody's Warns Poor Govt Spend a risk to Growth

Published: 18th April 2015 06:00 AM  |   Last Updated: 18th April 2015 05:40 AM   |  A+A-

MUMBAI:India faces downward risks to growth from any decline in government spending, which is depending besides others also on disinvestment of shares of public sector enterprises, says Moody’s Investor Services. “No disinvestment target has been met over the past five years, so the government needs everything to get it right this time around,” it said. “India’s state-owned companies are notoriously inefficient, with significant bureaucracy and endemic corruption. Asset sales can make companies more productive and should ease the supply bottlenecks choking the economy,’’ the rating agency said. Getting sufficient revenue remains a key as any shortfall will prompt the government to cut its expenditure to meet the 3.9 per cent fiscal deficit target for the current fiscal. The global rating agency has forecast India to achieve a growth rate of 7.5%, the same as by the World Bank and International Monetary Fund. “India’s economy is on a cyclical upswing. Forward-looking indicators suggest domestic demand is gathering momentum,’’ it said. The country plans to bank on foreign investors to increase investments and yet the country ranks 140th in ease of doing business. This is a key reason why India’s manufacturing contributed about 19% to its GDP compared with 30% by the rest of South East Asia. 


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