The ripples of wobbly conditions in the world economy and the deceleration in China can potentially slow down India’s growth, credit rating agency Moody’s said in a survey-based report released on Monday.
“The market participants we surveyed are increasingly concerned about the potential spillover on India’s growth story of external risks such as interest rate tightening in the US and China’s ongoing slowdown,” said Rahul Ghosh, a Moody’s V-P and senior research analyst.
The survey, conducted by Moody’s and its Indian affiliate ICRA Ltd in mid-January 2016, showed that market concerns over India’s economy have risen over the past seven months.
According to the report, titled “India Credit — Heard from the Market: India Not Immune to External Risks”, more than three quarters of those surveyed said India’s GDP growth will stay between 6.5% and 7.5% over the next 12 to 18 months. More than a third of market participants in the survey saw external shocks as the greatest challenge.
Last month, the government estimated that India will likely grow at 7-7.5% in 2015-16, slower than 8.1-8.5% estimated in February.
“However, the result is more likely a reflection of the broad-based spike in global risk aversion, rather than India’s relative vulnerabilities,” Ghosh said. “Investors see India as much-better placed ... than most of its emerging market peers, such as Indonesia, Turkey, Brazil, South Africa and Russia.”
Despite the growth downgrade, India’s economy, which grew at 7.2 % in April to September, will remain the world’s fastest-growing major economy outpacing China, set to grow at about 7%.
China, the world’s second-largest economy grew at 6.9% in 2015 from 7.3% in 2014, its slowest pace in a quarter of a century, triggering concern among global investors. The International Monetary Fund has projected China’s growth to slow to 6.3% in 2016 and 6.0% in 2017, from 7.3% in 2014.