The worst is over for India's economy, though growth may reach its potential only next year, with GDP expansion likely to touch 5 to 5.5 percent this year and more than 6 percent in 2015, Moody's Analytics said.
"The economy has stabilized in recent quarters, though GDP growth remains well below potential. Downside risks have receded. The rupee is less vulnerable to the U.S.Fed tapering than it was in 2013. The economy will slowly improve across 2014 but not hit potential until well into 2015," the agency said today in a report titled, 'India Outlook: Steady Growth, Lower Risk.'
Moody's Analytics is a division of Moody's Corporation that is engaged in economic research and analysis. The report is independent and does not reflect the opinions of its credit-rating wing, Moody's Investors Service.
"GDP growth will be in the 5 to 5.5 percent range through 2014, before heading north of 6 percent in 2015...the upturn will be led initially by exports, which started to lift from mid-2013, and then later in 2014, by an upturn in the investment cycle," analyst Glenn Levine said in the report.
Levine said, "There is a growing list of reasons to believe that the economy has started to turn the corner, albeit slowly, after 30 months of sub-par growth. Economic growth has stabilized and downside risks have fallen."
Stating that the worst may be over for the economy, Levine said the stream of bad news emanating from the economy has finally begun to slow. Externally, the global economy is stabilizing, with better growth is expected this year.
Exports have already started to pick up, helping to narrow the CAD, it said, adding that "on the home front, fewer downside risks, a more competent central bank governor, and the prospect of better government after the May elections have boosted business and investor confidence."
Basing its optimism on better-than-expected third-quarter growth (Q2 of FY14), the report said the economy should steadily improve in the coming quarters as downside risks have started to recede.