Rating agencies bullish on India growth story

Rating agencies bullish on India growth story
The Financial Express, December 24, 2009, Page 13

fe Bureau, Mumbai

In its latest report titled, ‘Asia-Pacific Outlook 2010: Returning Towards Normality’, Moody’s Economy.com has stated that after two tumultuous years, 2010 will resemble something closer to normal for the Asia-Pacific region.

The emerging giants — China and India will continue to drive the regional economy. With some of the Chinese government’s 4 trillion yuan stimulus still to be spent—and suggestions that further stimulus spending will be required — GDP growth in China will accelerate towards 9% in 2010. Boosted by the fillip from infrastructure and expected tourism spending ahead of the Commonwealth Games in New Delhi, India will expand by more than 8% in 2010 after this year’s relatively modest 6.1% growth rate. Also, Moody’s Economy.com expects the Reserve Bank of India to commence raising interest rates in the first half of 2010. The People’s Bank of China too will likely resort to adjusting bank reserve requirements and capital adequacy ratios to contain inflation, unsustainable credit growth and speculation in preference to using broad tools such as interest rates or currency appreciation.

Also, Standard & Poor’s, in its latest report titled, ‘Asia-Pacific Economic Outlook Q4 2009: Exit Strategies And Inflation Are Main Issues For 2010 As Region Recovers,’ observes that as Asia-Pacific is leading the world in economic recovery, so too will it lead the exit strategy. The next calendar year will see all Asia-Pacific economies adopt a tightening stance in one form or the other. This report provides an outlook opinion on Asia-Pacific economies based on recent data. The report’s author and director-cum-principal economist at Crisil, Dharmakirti Joshi, said that policy focus is gradually shifting from managing the crisis to managing the ongoing recovery. A critical challenge for all economies is how and when to exit from expansionary monetary and fiscal policies in a way that secures recovery. Most countries are likely to begin by exiting monetary easing and then gradually withdraw fiscal stimulus.

Another report by Standard & Poor’s titled, ‘Top 10 Expectations For Global Corporate Credit Markets’ indicates year 2010 as a turning point, characterised by overall prudence among market participants amidst a tepid recovery in mature economies and guarded optimism among emerging markets. In the report, Diane Vazza, head of Standard & Poor's Global fixed income research group notes that global outlook for 2010 is far from rosy, and additional risks might emerge from other key external variables, including geopolitical events and oil prices.