India to post strong GDP growth in coming quarters: S&P
S&P Global Ratings said on Wednesday that India expects strong economic growth in the coming quarters, even as inflation remains high, led by food prices. The economy is expected to grow at 9.5 per cent in the current fiscal, followed by 7 per cent expansion next year, it said, adding that high nominal GDP growth would be crucial to ensure fiscal consolidation.
“Given India’s weak fiscal settings and a high stock of debt at nearly 90 per cent of GDP, the nominal GDP growth is very important to prevent any further erosion of the fiscal settings in the country and to enable fiscal consolidation to some extent. going to be important, said Andrew Wood, director (sovereign) of S&P Global Ratings.
He said the fiscal deficit would remain high over the next two years but the debt/GDP ratio is expected to remain stable or flat. Wood further said that India’s external position in the context of the pandemic has strengthened and India is generating foreign exchange reserves at a record pace.
“India’s external position is very strong and this greatly supports India’s sovereign rating, despite the fact that we have had a simultaneous decline in fiscal position,” he said.
Speaking at ‘India Credit Spotlight 2021’, Vishrut Rana, S&P Economist (Asia Pacific) said: “Looking ahead we expect fairly strong economic growth in calendar Q3 and Q4.
Read more: India’s GDP grew 20.1% in April-June 2021, says government
“The second wave of the pandemic has been quite costly for economic activity. Families have been affected….. Families are going to repair their balance sheets and hold off on spending, which means activity after recovery begins. will be below trend”.
The Indian economy grew at 20.1 per cent in April-June, helped by a lower base compared to 1.6 per cent in the March quarter.
He added that inflation has been at the upper end of the tolerance range, which means that the central bank will be watching inflation very closely.
“The outlook is mixed and energy prices are likely to remain high… but the real dominant factor in the inflation basket is going to be food. We have had below-normal monsoon rains so far which could lead to an increase in food inflation. Overall inflation is likely to remain high and prevent the central bank from taking too many easing measures,” Rana said.
S&P has the lowest investment grade ‘BBB-‘ rating in India with a stable outlook.
Read more: India on course for 9% GDP growth in FY22, third wave still a concern
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