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S&P Lowers India GDP Growth Forecast by 30 bps to 7% For 2022-23

S&P Global Ratings cut India’s economic growth forecast for the current fiscal year ending March to 7 per cent as against 7.3 per cent projected earlier. S&P has also cut the growth forecast for 2023 to 6 per cent from 6.5 per cent as projected earlier. Subsequently, for FY24, GDP growth was downgraded by 50 basis points to 6%. The Indian economy grew 8.5 per cent in 2021.

What The Agency Said:

“The global slowdown will have less impact on domestic demand-led economies such as India, Indonesia and Philippines. India’s output will expand 7 per cent in fiscal year 2022-2023 and 6 per cent in the next fiscal year,” S&P Global Ratings Asia-Pacific chief economist Louis Kuijs said.

The Biggest Predicament:

Soaring energy bills are dragging on current-account positions for net energy importers, especially if strong domestic demand boosts import volumes.

The agency had earlier retained its FY23 forecast at 7.3% and said the inflation is likely to remain above 6% till the end of the fiscal. It expects inflation to rise by 6.8% in the current fiscal, and RBI’s benchmark rate to rise to 6.25% by March 2023. The central bank has raised the repo rate by 1.9% so far during the year to a three-year high of 5.9%.

About The Other Peer Economies:

In the first nine months of 2022, the trade balance of the Philippines shrank by about 6 per cent of GDP from a year ago. In Thailand, the drop was 5 per cent; in South Korea 4 per cent; and in India, the contraction was 3.6 per cent of GDP. This will likely lead to major current-account deficits in the Philippines and Thailand, and push the current-account balance of India into a sizable deficit, from a surplus in 2021.

China is not the only weak link in the global economy. The other giant of Asia, India, also suffered a year-to-year decline in the value exports in October. At least India relies less on exports as an engine of growth than does China.

About The Forex Reserves:

Foreign reserves have fallen in Asian emerging markets, even after adjusting for valuation changes. In India, the decrease in foreign reserves of USD 73 billion through August was far and above losses attributable to valuation changes (USD 30 billion). This, it said, implies that the central bank has made sizable interventions to support the Indian rupee.

What The Others Are Saying:

In a report titled ‘APAC Outlook: A Coming Downshift’, Moody’s said India is headed for slower growth next year, in line with the country’s long-term potential. But investments and productivity gains in tech and agriculture could accelerate growth. Moody’s had projected India’s growth rate to slow down to 8% in 2022, and further to 5% in 2023 from 8.5% in 2021.
The International Monetary Fund (IMF), in its World Economic Outlook report released last month, predicted that global economic growth will slow down to 3.2% in 2022 and 2.7% in 2023 from 6% in 2021.


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