Moody's growth estimates in based on the calendar year. India, however, measures its economic growth on the basis of the financial year (April-March).
In 2018-19 financial year, ending March 2019, the Indian economy is estimated to have grown 7 per cent, lower than 7.2 per cent in 2017-18.
Moody's said the announcement in Interim Budget 2019-20 on direct cash transfer programme for farmers and the middle-class tax relief measures will contribute a financial year stimulus of about 0.45 per cent of GDP.
"These measures will support growth through consumption over the near term, albeit at a fiscal cost...
"In India, government spending announced ahead of elections this year will support near-term growth," Moody's said.
It said RBI is likely to be able to maintain their current monetary policy stance after some tightening last year. The RBI cut its benchmark policy rate in February and changed the policy stance to "neutral" from "calibrated tightening". Inflation measures have steadily declined since the middle of 2018. On the banking sector, Moody's said, although the overall strength of the system is improving, it remains a constraint on the economy.
In February 2019, the government provided further capital infusions to public sector banks. These measures, combined with the application of the Prompt Corrective Action framework, which requires timely recognition of bad loans, and resolution of bad loans through the Insolvency and Bankruptcy Code, are helping to address solvency and asset quality challenges.
"However, a complete turnaround of the banking system requires more time amid slower-than-expected resolution of legacy problem loans," it said.
Non-performing assets declined to 10.8 per cent in September 2018 from a peak of 11.5 per cent in March 2018. The central bank expects this ratio to improve further to 10.3 per cent in March 2019.
Moody's said, with range-bound oil prices, export growth has outpaced import growth for the last two years. Fiscal spending on infrastructure and the rural economy should continue to support domestic activity.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.