Rising Demand will Push Indian Economy towards 5-6% Growth in 2015: Moody's

Aided by a strong domestic demand, the Indian economy is slated to witness a growth of 5-6% in 2015, rating agency Moody's said on Wednesday.

A report by economists at the rating agency – 2015 Outlook-Global Credit Condition – states that the world's largest democracy is expected to witness a strong gross domestic product (GDP) in 2015, at 5-6%; a full percentage point above the 2014 growth rate, according to a report by Live Mint.

Moody's expects the Indian domestic demand to expand strongly. A diversified export market may also help cushion the effects of the Chinese economy slowdown, the stifled European Union growth, and the continuing deflation in Japan.

Employment in the world's second most populous country is expected to rise along with its domestic consumption. Additionally, a fall in the global commodity rates would help keep inflation in check.

Official estimates put economic growth for the present fiscal ending March 2015 to fall within the range of 5.4% to 5.9%. The last two quarters had witnessed sub-5% growth rate. The improved manufacturing activity is expected to result in cash flows improving for the corporate market.

The banking sector seems to be a case of concern, as evinced by Moody's. The poor asset quality forces continued provisioning and higher capital buffers -- a drain on funds that could otherwise have been used more efficiently. The high leverage of the corporate sector could obliviate any meaningful recovery in the asset quality, notwithstanding a moderate rebound in economic growth, it noted.