India’s GDP is set to cross $3.5 trillion in 2022 and will be the fastest growing G-20 economy in the next few years, Moody’s said on Tuesday, but reforms and policy constraints could hamper investment.
In a research report, the US-based rating agency said bureaucracy could slow down approval processes in obtaining licenses and setting up businesses, increasing project duration.
Moody’s Investors Service said, “India’s high bureaucracy in decision-making will reduce its attractiveness as a destination for foreign direct investment (FDI), especially when competing with other developing economies in the region, such as Indonesia and Vietnam.” Happening.”
It said a large young and educated workforce, growing nuclear families and urbanization will drive demand for housing, cement and new cars. It said government spending on infrastructure would boost steel and cement, while India’s net-zero commitment would spur investment in renewable energy.
“Demand in the manufacturing and infrastructure sectors will grow 3-12 percent annually for the rest of the decade, yet India’s capacity will lag far behind China’s by 2030,” Moody’s said.
There is danger in the pace of investment in India: Report
It said that despite the strong potential of the economy, there is a risk that investment in India’s manufacturing and infrastructure sectors could slow due to limited economic liberalization or slow policy implementation.
“Lack of certainty about the time required to obtain land acquisition approvals, regulatory clearances, licenses and set up business could delay project construction. Also, India’s limited multilateral liberalization with respect to regional trade agreements Will put pressure on foreign investment in the country,” it said.
Ongoing efforts by the Indian government to reduce corruption, formalize economic activity, and strengthen tax collection and administration are encouraging, although risks to the effectiveness of these efforts are rising.
If implemented effectively, the measures taken over the years – including increasing the flexibility of labor laws, increasing the efficiency of the agriculture sector, expanding investment in infrastructure, encouraging manufacturing sector investment and financial sector Measures initiated during the pandemic to strengthen the economy – will lead to higher economic growth, Moody’s said.
(with inputs from agencies)
ALSO READ: Retailers can’t insist on customers’ mobile numbers for offering certain services