“Lacklustre global demand”, high influence from the corporate sector and weakened credit supply are some of the challenges the Indian economy will face in the years to come, according to Moody’s Investors Service. “Domestic political developments amid an uncertain global environment in 2016 are likely to keep the market sentiment volatile,” the credit rating firm said on Tuesday, in the latest edition of its quarterly “Inside India” report.

It is evident from the stalled Goods and Services Tax Bill and the Land Acquisition Bill that “political friction will keep the reform process uneven and slow-moving” in India, the report said. However, the US-based agency believes that business environment, infrastructure and growth in productivity will improve in India with targeted policy changes, which will support the country’s “medium-term potential”.

The Moody’s report added that the United Kingdom’s departure from the European Union, or Brexit, will have only a limited effect on India’s financial markets. This is because exports to the UK contribute merely 0.4% to India’s GDP, while that to member states of the EU account for 1.7%. Only a significant and extended drop in imports from these two regions could affect exports from India.