Moody's Investors Service says in a new report that the Government of India and the Reserve Bank of India's recent economic, fiscal and financial measures will, if successfully implemented, sustain higher GDP growth and address some of the constraints on India's sovereign credit profile.
Moody's analysis is contained in India: Recent Policy Changes to Support Growth Acceleration, which analyses the potential impact of labour and investment policies that comprise the Make in India campaign, financial inclusion measures, infrastructure development initiatives, clarity around inflation targets, as well as banking and energy sector reforms.
Moody's points out that these measures are incremental rather than radical. However, together, the various measures will harness India's economic advantages of size, diversity and a deep pool of labour and savings. Based on evidence from other countries and India's own experience in the prior decade, Moody's expects the incremental reforms to raise productivity, savings and investment growth.
Given the early days and the incremental nature of policy change, Moody's expects that it will take several quarters for an improvement in quantitative and qualitative credit metrics to crystallise.
