Moody’s Investor Services has lowered India’s economic growth forecast by 70 basis points to 7 per cent for 2022. This is in line with the downward revision of the global growth forecast.

 

Details

The report titled ‘Global Macro Outlook 2023-24: Global economy faces a reckoning over inflation, geopolitics and policy trade-offs’.

 

Highlights of the report

  • The downward revision assumes higher inflation, high interest rates and slowing global growth will dampen economic momentum by more than previously expected.
  • The weakening of the rupee and high oil prices continue to exert upward pressure on inflation, which has remained above the Reserve Bank of India’s ‘4 per cent -/+ 2 per cent’ target range for much of this year.
  • Annual headline CPI inflation increased to 7.5 per cent in September, 2022 after dipping below 7 per cent in July.
  • Wholesale price inflation, however, declined for four straight months, from a peak of 16.6 per cent in May to 10.7 per cent in September.
  • From May to September, the RBI has raised the repo rate a cumulative 190 bps to 5.9 per cent to contain inflation risks.

 

Other revisions

  • This is not the first downward revision of the Indian economy, though all the revisions are for the fiscal year.
  • The International Monetary Fund (IMF) cut India’s GDP forecast for the current fiscal (FY23) by 60 basis points to 6.8 per cent from 7.4 per cent estimated earlier.
  • Before that, the World Bank cut the forecast by 1 percentage point to 6.5 per cent, ADB by 50 basis points to 7 per cent, Fitch by 80 basis points to 7 per cent and the RBI by 20 basis points to 7 per cent.
  • S&P Global and OECD have maintained the forecast at 7.3 per cent and 6.9 per cent, respectively.