India's growth prospects weak, little chance of improvement next year: Moody's

India's economic growth remains weak and there is little chance of recovery in 2014, according to global rating agency Moody's.

"Complicated taxes and regulations, weak infrastructure, and a weak central government weigh on confidence and demand," Moody's said in a report on Tuesday.

"This will turn around eventually, but not in 2014, keeping GDP growth below potential."

General elections in May open possibility of better governance, it further said.

Monetary policy over the past three years has been at best ineffective and at worst counterproductive, but this is changing under the new central bank head, the agency said.

Reserve Bank of India (RBI) Governor Raghuram Rajan has made lower inflation the apex bank's primary goal, meaning further rate hikes are likely in the near term, it further said.

Mr Rajan, who delivered two repo rate hikes of 0.25 per cent each in as many policy reviews since he took over on September 4, had mentioned that he considered fighting inflation as the apex bank's "key responsibility".

The Reserve Bank is widely expected to raise repo rate once again on by 0.25 per cent on Wednesday in its bid to tame inflation. (Read more)

Wholesale price index-based inflation in November climbed to a 14-month high of 7.52 per cent as prices of food items such as onions and potatoes surged. Consumer price inflation touched a nine-month high of 11.24 per cent last month.

India's current account deficit has narrowed, for example, which should mute the impact of the Federal Reserve policy on the rupee. Moody's expect less financial volatility in 2014, but this outlook is uncertain.

Financial shocks are by definition unforeseen, and even if the source is unknown, some volatility should be anticipated given the parlous state of global recovery, it said.