NEW DELHI: According to the recent research report by Moody’s, India’s GDP has crossed 3.5 trillion in 2022 and will be the fastest-growing G20 economy over the next few years. The US-based rating agency also mentioned that reform and policy barriers could hamper investment in the country.
Moody’s Investors Service mentioned that “India’s higher 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.”
It further added that the country’s increasing nuclear families, workforce, and urbanisation will demand proper infrastructure, while its net-zero commitment will drive investment in renewable energy.
While demand across the manufacturing and infrastructure sectors will grow 3-12 per cent annually for the rest of the decade, India’s capacity will still rank well behind China’s by 2030,” Moody’s said.
The report stated that due to India’s limited economic liberalisation and slower policy implementation, there is a risk of investment in infrastructure and manufacturing sectors despite its economy’s strong potential.
“Lack of certainty around the amount of time needed for land acquisition approvals, regulatory clearances, obtaining licenses, and setting up businesses can materially prolong project gestation. Furthermore, India’s limited multilateral liberalisation with respect to regional trade agreements will also weigh on foreign investments in the country,” the report said.
Proper implementation of measures undertaken over the years including increasing the flexibility of labour laws, expanding investment in infrastructure, raising agricultural efficiency, incentivizing manufacturing sector investment, and strengthening the financial sector, would lead to higher economic growth.