Dear All,

 

Moody’s pegs India’s growth rate at 4.8% in Q3

 

Lower economic growth, volatile exchange rates, rising borrowing costs, tighter lending and monetary conditions and slow economic reforms have dampened prospects across many sectors

 

According to Moody’s Investors Service, the overall outlook for India 's non-financial corporates in 2014 is negative due to the country's weak economy, political uncertainty and the expected gradual scale back of quantitative easing by the US Federal Reserve.  At this juncture, Moody’s Analytics pegs India ’s GDP growth at 4.8% in the third quarter of the current financial year.

 

It may be mentioned that during the recent budget speech on Interim Budget 2014-15, our honorable Finance Minister, P.Chidambaram anticipated that growth in Q3 and Q4 of 2013-14 will be at least 5.2%.

 

Moody’s also reported that India 's GDP growth should remain weak at 5.5% in the fiscal year ending March 2015, as the general election due in the next three months will delay reforms needed to revive growth. In addition, the rupee will remain volatile, making the operating environment more challenging for importers and exporters.

 

In terms of specific sectors, the outlook is negative for the refining and marketing sector as refining margins would stay weak and for companies to suffer delays in subsidy reimbursements due to the upcoming elections. Outlook is also negative for the steel, metals and mining sectors because the weak economy and capacity expansions will weigh on the margins and utilization rates of steelmakers. In addition, the weak economy and tight monetary policy will pressure the credit profiles of companies in sectors such as cement, real estate, retail and automotive.

By contrast, Moody's outlook for the auto components sector is stable, as such firms are likely to control costs and arrest the decline in their margins in 2014. Moreover, outlook for the exploration and production sector is also stable, as a near doubling of gas prices from April 2014 will lift upstream revenues. However, the fuel subsidy burden on upstream companies could remain high, despite the expectation of a decline in total fuel subsidies. The outlook for the Information Technology and business process outsourcing sector and pharmaceutical sector is also reported stable. As for the telecommunications industry, average revenues per user and earning before interest, taxes, depreciation and amortization (EBITDA) margins should improve, resulting in a stable outlook for the sector.