With regard to inflation, Moody’s said although inflation eased slightly to 6.7% in July, it remains above the Central bank’s target range of 2-6% for the seventh straight month.
With regard to inflation, Moody’s said although inflation eased slightly to 6.7% in July, it remains above the Central bank’s target range of 2-6% for the seventh straight month.
Moody’s Investors Service on September 1 slashed India’s economic growth projection for 2022 to 7.7%, saying that rising interest rates, uneven monsoon and slowing global growth will dampen economic momentum on a sequential basis.
Moody’s had in May projected India’s Gross Domestic Product (GDP) at 8.8% this year. The economy contracted to 6.7% in 2020, the year when the pandemic struck the country, and grew at 8.3% in 2021.
Explained | What are the head and tailwinds in the economy?
In its update to Global Macro Outlook 2022-23, Moody’s said India’s Central bank is likely to remain hawkish this year and maintain a reasonably tight policy stance in 2023 to prevent domestic inflationary pressures from building further.
“Our expectation that India’s real GDP growth will slow from 8.3% in 2021 to 7.7% in 2022 and to decelerate further to 5.2% in 2023 assumes that rising interest rates, uneven distribution of monsoons and slowing global growth will dampen economic momentum on a sequential basis,” Moody’s said.
It expects inflationary pressures to weaken in the second half (July-December) of the year and further in 2023.
“A quicker let-up in global commodity prices would provide significant upside to growth. In addition, economic growth would be stronger than we are projecting in 2023 if the private-sector capex cycle were to gain steam,” it added.
Moody’s said high-frequency data for the Indian economy shows strong and broad-based underlying momentum in the first four months of fiscal year 2022-23 (April-July).
11% growth over next decade could make India world’s second largest economy by 2031: RBI Deputy Governor
As per official GDP estimates, the Indian economy expanded 13.5% in April-June 2022-23, higher than 4.10% growth clocked in previous March quarter.
Moody’s said services and manufacturing sectors have seen robust upswings in economic activity, according to hard and survey data, such as PMI, capacity utilisation, mobility, tax filing and collection, business earnings and credit indicators.
However, inflation remains a challenge with the Reserve Bank of India having to balance growth and inflation, while also containing the impact of imported inflation from the year-to-date depreciation of the Indian Rupee against the U.S. dollar of around 7%.
“India’s economic growth before the COVID-19 shock had materially slowed because of the impact of corporate-sector deleveraging on business investment.”
“With the deleveraging complete, corporate-sector investment is showing early signs of a pickup, which could provide support to a continued business cycle expansion through several quarters, supported by investment-friendly government policies and the rapid digitisation of the economy,” Moody’s added.
With regard to inflation, Moody’s said although inflation eased slightly to 6.7% in July, it remains above the Central bank’s target range of 2-6% for the seventh straight month.
The RBI forecasts that the inflation will remain high into 2023 and has hiked rates three times this year to 5.4% to tame inflation.
“The Central bank is likely to remain hawkish this year and maintain a reasonably tight policy stance in 2023 to prevent domestic inflationary pressures from building further,” it added.
For all the latest Business News Click Here
For the latest news and updates, follow us on Google News.