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Moody’s said on Tuesday that India’s GDP is set to cross $3.5 trillion in 2022 and will be the fastest growing G-20 economy in the next few years, but reform and policy barriers could hurt investment. In a research report, the US-based rating agency said lax bureaucracy could slow down the approval process for obtaining licenses and setting up businesses and delay projects.
Competition with these countries
Moody’s Investors Service said that India’s high bureaucracy in decision making can reduce the attraction of FDI. Especially at a time when there is competition in this area with other developing economies, such as Indonesia and Vietnam. It has been said in the report that the demand for housing, cement and new cars will increase due to educated workforce, increasing nuclear family and urbanization.
There will be an increase in demand
According to the report, government infra spending will boost steel and cement, while India’s net-zero commitment will encourage investment in renewable energy. Moody’s said that while demand in manufacturing and basic infra sectors will grow 3-12 per cent annually for the rest of the current decade, India’s capacity will still lag far behind China by 2030.
but what is the risk
According to Moody’s, despite the strong potential of the economy, there is a risk that investment in India’s manufacturing and basic infra may slow down due to limited economic liberalization or slower policy implementation. The pace of investment can be slow. 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.