Moody's sees slow fiscal reforms in India with coalition government

"We expect policy continuity, especially with regards to budgetary emphasis on infrastructure spending and boosting domestic manufacturing, to support robust economic growth,” the rating agency said in a note.

The country’s fiscal outcomes will be weaker than Baa-rated peers, it noted.

"Our assessment of India's economic strength incorporates real GDP [gross domestic product] growth of around 7 per cent over the three-year period between fiscal 2023-24 through 2025-26, while factoring potential upside over the medium-term resulting from improvements in productivity and potential growth on the back of traction on infrastructure development and digitalization," it said.

Although the rating agency projects India to grow faster than all other economies in the G20 in fiscal 2025-26, near-term economic momentum masks structural weaknesses that pose risks to long-term potential growth.

"High levels of youth unemployment across all sectors and weakness in productivity growth in the sovereign's large agriculture sector continue to constrain its growth potential," it said.

"India's fiscal metrics, whether aggregated at a central government or general government level, would remain worse than before the pandemic, when India's rating was higher at Baa2," it added.

Fibre2Fashion News Desk (DS)