S&P cuts India’s economic growth forecast to 7% for current fiscal

PTI

New Delhi, November 28

S&P Global Ratings on Monday cut India’s economic growth forecast for current fiscal year to 7%, but said the domestic demand-led economy will be less impacted by the global slowdown.

S&P had in September projected the Indian economy to grow at 7.3% in 2022-23 and 6.5% in next fiscal year (2023-24).

QUARTERLY UPDATE FOR ASIA-PACIFIC

• The global ratings agency had in September projected the Indian economy to grow at 7.3% in 2022-23 and 6.5% in next fiscal year (2023-24)
• In its quarterly economic update for Asia-Pacific, the global ratings agency said in some countries the domestic demand recovery from Covid has further to go and this should support growth next year in India

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

The Indian economy grew 8.5% 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.

It projected inflation to average 6.8% in current fiscal year and RBI’s benchmark interest rate to rise to 6.25% by March 2023. To control price rise, RBI has already hiked interest rate by 1.9 percentage points to a 3-year high of 5.9%.

India’s wholesale and retail inflation fell in October after remaining high for most part of the year mainly due to supply chain disruptions following the outbreak of the Russia-Ukraine war in February.

Retail or CPI inflation fell to a 3-month low of 6.7%, while wholesale or WPI inflation was at a 19-month low of 8.39% last month.

With regard to exchange rate, S&P said foreign reserves have fallen in Asian emerging markets, even after adjusting for valuation changes.

It pegged the exchange rate at Rs 79.50 to a dollar by March-end, as against the current Rs 81.77 to a dollar.

“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,” it said.

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