Credit rating agency Moody’s said that India’s gross domestic product (GDP) will exceed $3,500 billion in the year 2022 and it will be the fastest growing economy in the G20 group for the next five years. While expressing an optimistic outlook on India’s growth rate, the US rating agency in a research report has expressed apprehension about the attitude of the bureaucracy involved in the decision-making process. It said that the delayed attitude of the bureaucracy could reduce India’s attractiveness as a foreign direct investment (FDI) destination.
According to Moody’s, India’s growth may be hampered by bureaucratic constraints. The bureaucratic slowness in the process of obtaining licenses and permission to start a business can increase the time taken to set up projects.
“India’s top bureaucracy involved in the decision-making process will reduce India’s attractiveness as an FDI destination compared to other developing countries in the region such as Indonesia and Vietnam,” Moody’s Investor Service said in the report.
However, India’s large young and educated workforce, increasing number of small families and urbanization will drive demand for housing, cement and new cars. Apart from this, increasing government spending on infrastructure sector will increase investment in renewable energy from steel and cement business and net-zero emissions.
According to the report, demand in the manufacturing and infrastructure sectors will drive the Indian economy to grow at a rate of 3-12 per cent annually for the rest of this decade. Despite this, India’s capacity will remain behind that of China till the year 2030.
Moody’s said that India’s limited liberal attitude towards regional trade agreements will also have an impact on attracting foreign investment.
While government efforts to crack down on corruption, organize economic activity, and improve tax collection and administration are encouraging, there are risks to the effectiveness of these efforts.
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