India's GDP to reach nearly 8% in four years: Moody's poll

Key Highlights: 

• India's GDP may reach 8% growth rate in 3-4 years

• Power sector's outlook continues to be stable

• Cross-border bond issuance by Indian companies jumped 200% during January-April 2017

Moody's Investors Services and ICRA Ltd on Monday said that positive impact of GST would help India's GDP accelerate around 8% over the next three-four years. 

"Given economic and institutional reforms in India, and further changes that could follow, India will likely grow faster than similarly rated peers over the next 12-18 months, despite a short-term drag caused by demonetisation," said Marie Diron, a Moody's Associate Managing Director.

Moody's Investors Service and its Indian affiliate, ICRA Limited, said that according to their polls of some of the largest investors, intermediaries and issuers in Asia Pacific, respondents are confident about India's stable economic growth prospects.

"More than 60% of market participants that Moody's and ICRA surveyed in Mumbai and Singapore believe that India's (Baa3 positive) GDP growth rate will range between 6.5% and 7.5% over the next 12-18 months," the poll results show. 

Moody's view is that India's GDP growth, together with capacity additions and stabilising commodity prices, will support EBITDA growth of 6%-12% at Indian corporates over the next 12-18 months.

On the question of which factors will drive conditions for Indian corporates over the next 12-18 months, 58% of respondents in Mumbai and 53% in Singapore say that a combination of three factors: GDP growth of 7.0%-7.5%, the commissioning of new production capacity and stabilising commodity prices will drive EBITDA growth.

Moody's view is that India's GDP growth, together with capacity additions and stabilising commodity prices, will support EBITDA growth of 6%-12% at Indian corporates over the next 12-18 months.

As for the country's banks, the same percentage of the audience in Mumbai and Singapore (76%) agree that the greatest risk to the asset quality of Indian banks over the next 1-2 years is their exposures to large corporates in the power, steel and infrastructure sectors.

While Moody's agrees that the banks' asset quality can deteriorate due to their exposures to certain sectors such as power, steel and infrastructure, the formation of new non-performing loans (NPLs) will be slower than in the past 2-3 years, because of the banks' recognition of a large amount of NPLs.