India’s growth rebound good news for tax revenues and capital inflows: Moody's

It also supports credit quality.

India’s economic recovery, manifested in recently released data showing annual GDP growth of 5.7% in the quarter ended June, is in keeping with Moody's long-held view that growth deceleration to sub-5% levels over the last two years would reverse over time

According to a research report from Moody's, this forecast has underpinned the stable outlook on India’s rating amid currency volatility, declining investment and poor market sentiment.

Further, higher growth is likely to increase tax revenues and capital inflows, said the report.

Here's more from Moodys:

This will reverse some of the weakening that has occurred in India’s fiscal and external position in recent years.

India’s macroeconomic outlook will also improve if, as we expect, the authorities implement policies that ease inflationary pressures and increase infrastructure investment.

Nonetheless, we forecast India’s fiscal, inflation and infrastructure metrics to remain weaker than the median for similarly rated peers.

While stronger growth in this large and diverse economy will help to counterbalance these credit challenges, they limit further upward momentum in the sovereign rating.