S&P Global Ratings on Monday cut India’s economic growth forecast to 7 per cent for the current financial year 2022-23, compared with the 7.3 per cent GDP growth projected in September. S&P, however, said the global slowdown will have less impact on domestic demand-led economies such as India.
“India’s output will expand 7 per cent in the fiscal year 2022-2023 (ending in March 2023) and 6 per cent in the next fiscal year, by our estimates. Indonesia and the Philippines should both grow at least 5 per cent in 2023,” said Louis Kuijs, chief economist at S&P Global Ratings Asia-Pacific.
S&P had in September projected the Indian economy to grow 7.3 per cent in 2022-23 and 6.5 per cent in the next fiscal year (2023-24).
The Indian economy grew 8.5 per cent in 2021. In its quarterly economic update for Asia-Pacific, S&P said in some countries the domestic demand recovery from COVID has further to go and this should support growth next year in India.
“In some countries, the domestic demand recovery from COVID has further to go. This should support growth next year in India, Indonesia, Malaysia, the Philippines, and Thailand,” S&P said on Monday.
It added that higher interest rates will have a pronounced hit on growth in parts of the region, either because policy rates climb strongly or the effect of the increases is profound. ” The rise in the Reserve Bank of India’s policy rate of 1.9 percentage points so far this year is from an already elevated level at end-2021.”
On the foreign exchange reserves, S&P said forex reserves have fallen in Asian emerging markets, even after adjusting for valuation changes. In India, the decrease in foreign reserves of $73 billion through August was far and above losses attributable to valuation changes (of $30 billion). This implies that the central bank has made sizable interventions to support the Indian rupee.
Stating that inflation in India has remained high, it said the retail inflation in the country is expected to be at 6.8 per cent during the current financial year. This is higher than the last year’s 5.5 per cent.
The RBI expects the company’s inflation to be at 6.7 per cent for the current financial year 2022-23.
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