Moody's see domestic and external headwinds to persist

New Delhi: Top ratings firm Moody's on Tuesday said the measures announced by the government to boost the sagging economy would support investors and business sentiments, but domestic and external headwinds would persist over the fiscal.

Responding to the economic measures announced by Finance Minister Nirmala Sitharaman, stock markets surged by more than 2 per cent on Monday.

"We expect that the recent measures announced by the Indian government to offer tax incentives and some reforms across a variety of sectors, in an effort to stimulate slowing economic growth, will provide some support to investor and business sentiment. It will also support acceleration of capitalisation in public sector banks for provision of credit and monetary policy easing," said William Foster, Vice President, Sovereign Risk Group, Moody's Investors Service.

"However, we also expect domestic and external headwinds to persist over the course of the year, resulting in 6.4 per cent real GDP growth in the fiscal year ending in March 2020, before growth picks up to 6.8 per cent next year," Foster added.

Besides rolling back the controversial surcharge on foreign portfolio investors (FPIs), the government had last week announced to provide Rs 70,000 crore upfront for banks' recapitalisation which will give firepower to PSBs for lending to retail and corporate customers.

Addressing a press conference in the Capital, Nirmala Sitharaman had said government would come out with more such measures in coming days and weeks.

Investors' hope seems high on measures already taken and more being in the pipeline as stock markets opened in green for second consecutive day on Tuesday. The BSE was 192.18 or 0.51 per cent up at 10.40 in the early session.

Close on the heels of economic package, the RBI board has cleared a Rs 1.76 lakh crore transfer to the government which include Rs 1.23 lakh crore of surplus for 2018-19 and an additional provisions of Rs 52,637 crore. The record funds transfer, experts and economists say, would give government more fiscal headroom and hence higher spending on various public projects.