Moody's anticipates Indian Economy to perk up in range of 5.5-6.5 % in 2013 fiscal year

Moody's Investors Service in its report said the Indian economy is expected to perk up and grow in the range of 5.5-6.5 pc in 2013.

The global rating agency said that the country is struggling to boost investment and economic growth referring cautious private sector and relatively high inflation.

According to the agency, though the steps taken by the government new investments are relatively small in scope, it is estimated that Indian economy would see 5.5-6.5 percent growth in 2013, as against 3.9 percent last year. The growth is anticipated to improve further to 6-7 percent in 2014, it said. 

The growing Current Account Deficit (CAD) remains a relentless concern for India said the rating agency as it leaves the country .

The agency noted that the Current Account Deficit (CAD) remains a persistent concern for India, "as it leaves the country open to capital exodus if investors' risk appetite starts to decline.

CAD touched an all-time high of 6.7 percent in October-December 2012 quarter. Concerned over the widening CAD, mainly due to high gold imports, rose the concerns. To reduce it both the government and the Reserve Bank are taking steps to check imports.

Noting that the growth has recently fallen short of expectations in India, Moody's said that policymakers' efforts to incentivise new investment and saving have been relatively small in scope, and are unlikely to presage a pronounced increase in capital spending in the near term. 

The agency said India (similar to Brazil) is "struggling to boost investment and wider economic growth in the face of private- sector caution and relatively high inflation".

Moody's cited a serious threat to the global recovery is a possibility, which might be caused by the slower-than-expected growth in key emerging markets like China, India and Brazil.

In spite of the recent decline in the WPI inflation, the CPI inflation which is still in double digits, shows the pricing pressures in the country. As the GDP may pickup in 2013 it will take one or two more years to match the growth in 2010 and 2011, said Moody's.

Finance Ministry officials recently told Moody's representatives that India's growth story is credible and the government is taking steps to deal with the fiscal issues.