Despite the headwinds posed by muted global growth and an unfavourable monsoon outlook, Indian economic growth is expected to improve to 7.6-7.8% in 2015-16 from 7.3% in 2014-15, according to ICRA.
Higher government spending on infrastructure, simplification of clearances, easing of norms for foreign direct investment, continued reform momentum and monetary easing are expected to support a revival in investment activity in FY16, led by sectors such as roads, urban infrastructure and freight corridors, it opined.
ICRA said, "Moderating inflation is expected to boost urban consumer demand, while rural demand may post an improvement in H2FY16. Nevertheless, the pace of fresh investment in some sectors such as thermal power and steel is likely to remain sluggish on account of the continuing constraints posed by the lingering sector-specific issues, high indebtedness of some Corporate groups, weak asset quality of the Banking system, and availability of cheaper imports, as evidenced by the sluggish revival of projects despite the intervention of the Cabinet Committee on Investments (CCI)."
"Although harsher-than-expected monsoon dynamics and muted export growth pose risks to our baseline view that Indian economic growth will improve to 7.6-7.8% in 2015-16, we expect it to outpace the expansion recorded by most countries with a comparable size in the current fiscal," it said.