India's new GDP figures show the country is outpacing China's growth rate, while experts question the quality of the data compiled by India's statistics office.
Today Moody's agreed with the rosy assessment, and said the Indian economy is likely to grow at 7.3 percent, marginally higher than last year's revised figures. Interest rate cuts will lead to higher domestic demand, which will power this growth, the study said.
This is similar to International Monetary Fund's expectation of 7.5 percent growth in 2015-16, based on recent policy measures, higher investments and lower oil prices.
"Low inflation has enabled the Reserve Bank of India to cut interest rates by 50 basis points easing pressure on the private sector. Lower rates as well as the government's infrastructure and disinvestment programs should provide a boost to domestic-oriented industries," Moody's Analytics said in the report. Progress on disinvestment is also expected to push growth higher.
Both Raghuram Rajan, the central bank governor, and Arvind Subramanian, chief economic advisor to the government, have called the new GDP figures puzzling, because it does not correspond to data from other indicators that show slower growth. For example, industrial production is weak, and corporate earnings might be the lowest in last four years. Those are not signs of a fast-growing economy.
Global agencies such as Moody's and the IMF have factored in the revised figures for now. A team from the IMF will review the new GDP figures starting April 22.