7.4% growth tipped for India in FY2015, 7.9% in FY2016, but investment lags

MUMBAI - India's economic growth prospects appear brighter, particularly among emerging markets, according to a report by CRISIL Ltd, the Mumbai-based subsidiary of ratings agency Standard & Poor's.

"India's economy has been on a gradual uptrend since May 2014 but the country's corporate sector remains in a wait-and-see mode before committing to significant new investments," says CRISIL's chief economist, Dharmakirti Joshi.

The report notes that India is now the fastest-growing economy among the BRICS nations (Brazil, Russia, India, China, and South Africa) and is no longer seen as part of the "fragile five" (the others being Turkey, Indonesia, Brazil, and South Africa).

India's strengthening economy now makes it better prepared to face the volatility in capital flows arising from interest rates hikes by the US Federal Reserve.

"CRISIL forecasts India's GDP growth to increase to 7.9% in fiscal 2016 from an estimated 7.4% in fiscal 2015," says Joshi. "Our projections are based on falling inflation, declining interest rates, and our expectation of a healthy monsoon this year."

Consumer and business sentiment in India has improved, the government's reform agenda is strong, and global crude oil prices have fallen, the report says.

However, the investment cycle in India is yet to show any signs of pick-up, and high non-performing assets in the banking sector foster risk aversion and mute monetary transmission and credit growth, it adds.

Therefore, it is important for India to stay the course of economic reform and renewed growth and to get the private corporate sector to join in the journey. www.standardandpoors.com (ATI).