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India’s GDP projection lowered by Moody’s to 7.7 percent

Moody’s Investors Service drastically reduced India’s GDP growth by 1.1 percentage points, citing a slowdown in global growth, rising interest rates, and an irregular monsoon as reasons for the economy’s potential to lose steam in the coming quarters. According to Moody’s Global Macro Outlook 2022-2023 study, India’s central bank is anticipated to maintain a hawkish posture this year and keep a moderately restrictive policy stance in 2023 to prevent domestic inflationary pressures from escalating.

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Moody’s Projection about India’s GDP: Highlights

  • India’s GDP is now expected to grow at a 7.7% annual rate, down sharply from the earlier estimate of 8.8% in May.
  • This information was released a day after government data revealed that the Indian economy expanded 13.5% year over year during the April–June quarter.
  • But according to experts, this expansion is anticipated to slow down in the future quarters due to, among other things, rising interest rates.
  • Since May, the Reserve Bank of India has raised its repo rates 140 basis points in total, including a 50 basis point rise during the MPC meeting in August.
  • Moody’s said India’s central bank is likely to remain hawkish this year and maintain a reasonably tight policy stance in 2023 to stop domestic inflationary pressures from intensifying according to the Moody’s Global Macro Outlook 2022–2023 report.
  • The RBI must balance growth and inflation while also controlling the effects of imported inflation brought on by the about 7% year-to-date depreciation of the Indian rupee against the US dollar.

Moody’s Projection and the Global Inflation:

  • A more rapid decline in global commodity prices would have a large positive impact on growth, according to Moody’s.
  • If the private sector capex cycle were to pick up steam, economic growth would be stronger than what is anticipated for 2023.
  • Even though it marginally decreased in July to 6.7%, inflation is still 7. consecutive months above the central bank’s goal range of 2–6%, according to Moody’s Global Macro Outlook 2022–2023 report.

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