Moody’s sees end of tunnel

The rating agency added that a healthy 7.5 per cent GDP growth for India for the fiscal year ending March 2017 and a pick up in manufacturing activity would be broadly supportive of business growth.

“However, the corporates remain vulnerable to the volatile Indian rupee as against the US dollar and to low commodity prices, which has in turn led to a sharp decline in external trade,” said Vikas Halan, vice-president and senior credit officer, Moody’s Investor Service.

Moody’s also said that the fall in commodity prices has benefited many Indian corporates given the country’s status as a net importer of raw materials and its recent history of high inflation. “The resultant moderating inflation should result in lower borrowing costs for corporates and yields on corporate bonds,” the rating agency said.

In the real estate sector, Moody’s expects demand to improve in 2016 on the back of lower interest rates, although approval delays could push back project launches for property developers.

In the auto sector, the rating agency expects retail sales volumes to grow 6 per cent in 2016 on the back of sustained growth in passenger vehicles sales and a recovery in commercial vehicle sales. Despite these overall supportive domestic conditions for the country’s corporates, Moody’s believe that the loss of reform momentum could act as a potential headwind.

The Modi administration so far this year has been unable to enact legislation on key reforms, including a unified GST Bill and the Land Acquisition Bill.