S&P cuts India’s economic growth forecast to 7%
S&P Global Ratings on Monday cut India’s economic growth forecast for the 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 fiscal year 2023-24.
“The global slowdown will have less impact on domestic demand-led economies such as India... India’s output will expand 7% in fiscal year 20222023 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 Reserve Bank of India’s (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 ₹79.50 to a dollar by March-end, as against the current ₹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.