Moody’s pares India growth hopes to 7%
The Hindu
Rupee, oil prices key factors behind downward revision for 2022-23; Growth to slip below 5% next year
Citing the weakening Rupee and high oil prices, global rating firm Moody’s Investors Service on Friday, November 11, 2022, scaled down India’s 2022-23 growth projection from to 7% from an earlier estimate of 7.7% and warned that the economy’s growth will decelerate further to just 4.8% in 2023-24.
“The downward revision assumes higher inflation, high interest rates and slowing global growth will dampen economic momentum by more than we had previously expected,” the firm noted, with the weakening rupee and oil prices continuing to exert pressure on the inflation front.
In its latest global macro outlook for 2023-24, Moody’s downgraded forecasts for a number of G-20 countries, including the US, China, Japan, India and a number of European countries. Real GDP of the G-20 economies is expected to decelerate from 2.5% in 2022 to 1.3% in 2023, significantly lower than Moody’s previous estimate of 2.1%.
However, growth outcomes of the G-20 emerging market economies will vary depending on economic structures, with large domestically driven emerging market economies like India and Brazil expected to be ‘less vulnerable’ to weakening G-7 growth than export-oriented countries.
Amid a flurry of negative global growth drivers, Moody’s said some country-specific characteristics provide a degree of strength, including the consumer resilience from still strong post-COVID recovery momentum in domestically driven economies, including the US, Brazil and India, as seen through robust expenditure on services.
India’s underlying growth dynamics are fundamentally strong, boosted by a rebound in services activity. Government capital expenditure and manufacturing capacity utilization have also improved, the firm said.
“…These domestic strengths will continue to support the domestic growth narrative, global financial tightening and slowing external demand will pose downward pressure on growth in 2023,” the rating major noted. After slipping to 4.8% in 2023-24, India’s growth will rise to around 6.4% in the next year, it reckoned.