Moody’s reduced India’s economic growth rate in view of rising inflation
Rating agency Moody’s has reduced India’s economic growth forecast for 2022-23. The rating agency has projected India’s GDP growth rate to be reduced by 30 basis points from 9.1 percent to 8.8 percent in the 2022 calendar year due to the rise in inflation. According to the rating agency, the GDP can be 5.4 percent next year.
GDP growth will be 8.8% in 2022
Moody’s has said in its Global Macro Report Outlook report that due to the rise in the prices of crude oil, food and fertilizers, Indian’s financial condition will be affected by their spending capacity. Recently, S&P Global Ratings had also projected the GDP to be 7.3 percent for the current fiscal year 2022-23, while the GDP in 2023-24 is estimated to be 6.5 percent. According to S&P, India’s GDP growth rate has been 8.9 percent in the financial year 2021-22.
Inflation will bother
According to Moody’s, the inflation rate is estimated to be 6.8 percent in 2022, while in 2023 it can be 5.2 percent. According to RBI, the inflation rate is estimated to be 5.7 percent in 2022-23. However, in the meeting of the Monetary Policy Committee in June, RBI may issue a fresh inflation rate estimate. Earlier, brokerage house Morgan Stanley had also said that due to rising inflation, weak consumer demand, tight financial conditions on business sentiment. There will be a bad effect as well as there will be a delay in the recovery of Capital Expenditure (CAPEX). Due to the rise in prices and rising commodity prices, inflation will increase, as well as the current account deficit can also increase to a 10-year high of 3.3 percent.
Russia-Ukraine war increased difficulties
However, earlier Morgan Stanley, S&P Global Ratings and Moody’s cut the GDP growth rate forecast for the next two years, pointing to the fact that due to the Russia-Ukraine war, commodity and edible oil prices, including crude oil To what extent has the boom in India been affected. Retail inflation has reached an 8-year high of 7.79 percent in April 2022, while the wholesale inflation rate has reached a nine-year high of 15.08 percent. To control inflation, RBI has increased the repo rate. But if inflation rises, debt can become more expensive, which will have an effect on demand.
