Moody's Investors Service said India's rising vaccination rate, low interest rates and higher public spending drive the positive outlook for the corporate sector. Moody believes that India's economic growth will rebound strongly, with GDP increasing 9.3 per cent in the current fiscal year, March 2022, followed by 7.9 per cent in fiscal 2023.
In a report, Moody's said credit fundamentals are favorable for India's companies on a sustained economic recovery. Earnings of rated companies will increase on strong consumer demand and high commodity prices.
India's rising vaccination rate, stabilizing consumer confidence, low interest rates and higher public spending, underpin positive credit fundamentals for non-financial companies, it said.
India's steady progress on vaccine against the coronaviruses will support a recovery in economic activity. Consumer demand, spending and manufacturing activity are recovering after the easing of the pandemic restrictions. Moody's analyst Sweta Patodia said that trends, including high commodity prices, will drive significant growth in the company's EBITDA over the next 12 -- 18 months.
The government spending on infrastructure will support demand for steel and cement. The rise in consumption and India's push for domestic manufacturing and benign funding conditions will support new investments.
If new infections were to occur, it could cause new lockdowns and erode consumer sentiment. In addition to that, there are delays in government spending, energy shortages that lower industrial production or softening commodity prices that could curtail companies' earnings.
India's low interest rates will reduce funding costs and support new capital investment as demand grows. It added that rising inflation may result in a higher than expected increase in interest rates, which would weigh on business investment.