S&P raises India GDP forecasts, says it's a bright spot

Mumbai, Feb 26: Terming India as the "bright spot" in Asia Pacific, Standard & Poor's today sharply revised upwards country's GDP forecast to 7.9 per cent next fiscal and even higher 8.2 per cent in the year after.

The revision comes within days of it flagging concerns over low per capita income and high fiscal deficit. It also comes just two days ahead of the Budget.

"India should be the Asia-Pacific region's bright spot," S&P said and revised steeply upwards its growth estimates.

The rating agency said economic growth will rise to 7.9 per cent in FY 2016, up from its previous estimate of 6.2 per cent, and will go up further to 8.2 per cent in FY 2017 as against 6.6 per cent estimated previously.

The agency, which rates India among the lowest in the investment grade at BBB-, said the rising investment and low oil prices are the primary factors boosting the chances for the economy. It may be noted that the government had earlier this month changed the methodology of computing GDP, which showed a dramatic increase in GDP growth to 6.9 per cent from the earlier 5 per cent in FY2014, and 7.4 per cent for this fiscal, up from a projected 6 per cent.

In a brief note sent to the press by the rating agency, it is unclear if Standard & Poor's is re-pegging its estimates based on the revisions in GDP computation or not. In the note, the agency said growth in the Asia-Pacific region will be slightly lower, but India's "star is rising".

"Weaker growth in China and Japan may be weighing on the overall sentiment, although India's star is rising," it said.

Finance Minister Arun Jaitley is slated to present his first full Budget on Saturday, in which the government spells out it growth target for the next fiscal.

The agency had earlier this week come up with a commentary flagging concerns over the fiscal deficit and low per capita income. "India's low income levels and weak fiscal and debt indicators constrain the country's credit profile," it had said this Monday.

Although it said that last year's election results have created a conducive environment for reforms with political stability, the agency termed the "governance effectiveness" as a "neutral credit factor."

PTI