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Govt stability would spur economic growth in India: S&P Guest Opinion

The report says that if either leading party has to scramble to build a governing coalition several sectors of the economy could be hurt more than others

April 28, 2014 2:26 IST | India Infoline News Service
The best chance for significant economic improvement in India would come with the election of a stable government that the public views as having a mandate to attack India's economic problems. That's according to a guest opinion report by Crisil Ltd. that Standard & Poor's Ratings Services published today, titled "India Economic Outlook: Government Stability Would Spur Growth."

"The direction of India's economy in 2014 could well hinge on the outcome of the national election, which concludes on May 12. An election that results in protracted, quarrelsome, and difficult coalition-building to form a new government is likely to be seen as weak, ineffective, and unable to bring about the changes necessary for growth," said Crisil Ltd. economist Dharmakirti Joshi.

The report says that if either leading party has to scramble to build a governing coalition several sectors of the economy could be hurt more than others. The real estate, capital goods, construction, power, cement, and steel sectors could suffer amid the weak investment outlook, policy stasis, and stretched balance sheets that would ensue. Consumption-linked sectors, including automobiles, low-priced consumer goods, and hotels, might also feel the heat.

The report also suggests that better coordination between monetary and fiscal policy is imperative if the Indian economy is to improve.

Crisil Ltd is the Mumbai-based subsidiary of Standard & Poor's.

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