India growth to moderate in 2008: S

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New Delhi, Dec 5 (UNI) An international rating agency today said Reserve Bank's measures are expected to slow down India's economic growth marginally next year.

In its India overview for 2008, Standard and Poor's projected its real GDP growth at about 8.1-8.6 per cent, as against 8.5-9.0 per cent in 2007.

Agency's chief economist for Asia-Pacific Subir Gokran said"Overall, while global developments have made the environment more risky, the strength of domestic demand is expected to keep the Indian economy on a relatively high growth trajectory.

The moderation to 8.1-8.6 per cent this year reflects a soft landing, taking the Indian economy closer to its current trend growth rate, estimated at 8.5 per cent." It said with domestic forces driving demand, India is relatively immune to US credit woes. However, India continues to see a very rapid growth in energy consumption and hence domestic growth drivers may be hindered by oil prices remaining at these levels. This may impact the ability of the Indian economy to grow under its own steam, S&P added.

But S&P described India's outlook as stable despite overbearing political issues. It said while Pakistan and Sri Lanka are more politically unstable, their economies are safe, adding "economies in the Indian sub-continent, on the whole, have proven resilient to the vagaries of politics in the past, and are likely to continue to be so in 2008." Describing the overall corporate credit outlook as stable, S&P said banking and insurance sector growth continues to be strong."In 2008, the Indian banking system, which has been unaffected by the US sub-prime markets, will continue to reap benefits of strong domestic economic growth," said Ritesh Maheshwari, senior director of agency's financial institutions ratings.

The agency also expected India's insurance ratings in 2008 to be stable due to adequate capital and strong risk profiles of most insurers even as operating performance of insurers' continues to remain under pressure due to competition and high start-up costs.

It rated India's equity outlook as neutral. "We are largely neutral on the Indian equity markets as additional foreign inflows may be muted owing to recent government moves to limit foreign fund inflows via offshore derivatives; but believe that the market is at a comfortable point with corporate earnings growth to support further upside in 2008," said Lorraine Tan, head of Asia-Pacific equity research for S&P's equity research.


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