Burgeoning infrastructure and manufacturing sectors could push India to be the fastest growing economy over the next few years, said Moody's Investor Service in its latest report. But the global credit rating agency also raised concerns that reform and policy barriers could hamper investment.
"Despite the positive backdrop, bureaucracy could slow approval processes in obtaining licenses and setting up businesses, prolonging project gestation," Moody's said, indicating a possibility of losing out to Indonesia and Vietnam.
"Ongoing efforts by India's government to reduce corruption, formalize economic activity, and bolster tax collection and administration are encouraging, although there are increasing risks to the efficacy of these efforts," it said.
Moody's lauded the government's efforts like the National Infrastructure Pipeline and Atmanirbhar Bharat.
While rising per capita incomes along with growing working age population is expected to push consumption, Moody's said government spending is expected to drive infrastructure-related sectors like cement and steel. Moreover, net-zero commitments are expected to boost investment in the renewables industry.
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