Moody's cuts GDP growth forecast
Says economy will grow at 7.7%, down from earlier projection of 8.8%
New Delhi: Moody's Investors Service on Thursday slashed India's economic growth projection for 2022 to 7.7 per cent, citing dampening of economic momentum in coming quarters on rising interest rates, uneven monsoon, and slowing global growth. This is a sharp 1.1 percentage points cut from the growth projection of 8.8 per cent for current year made in May by Moody's. The Indian economy grew 8.3 per cent in 2021 after a 6.7 per cent contraction in 2020, the year when the pandemic struck the country.
In its update to Global Macro Outlook 2022-23, Moody's said India's central bank is likely to remain hawkish this year and maintain a reasonably tight policy stance in 2023 to prevent domestic inflationary pressures from building further. "Our expectation that India's real GDP growth will slow from 8.3 per cent in 2021 to 7.7 per cent in 2022 and to decelerate further to 5.2 per cent in 2023 assumes that rising interest rates, uneven distribution of monsoons, and slowing global growth will dampen economic momentum on a sequential basis, " Moody's said.
Moody's projections came a day after India released its GDP estimates for June quarter as per which the economy expanded 13.5 per cent in the three-month period. This was higher than 4.1 per cent GDP growth clocked in January-March. Moody's said high-frequency data for the Indian economy shows strong and broad-based underlying momentum in the first four months (April-July) of fiscal year 2022-23.
As per official GDP estimates, the economy expanded 13.5 per cent in April-June 2022-23, higher than 4.10 per cent growth clocked in previous March quarter. Moody's said services and manufacturing sectors have seen robust upswings in the economic activity, according to hard and survey data, such as PMI, capacity utilization, mobility, tax filing and collection, business earnings and credit indicators.
Our expectation that India's real GDP growth will slow from 8.3% in 2021 to 7.7% in 2022 and to decelerate further to 5.2% in 2023 assumes that rising interest rates, uneven distribution of monsoons, and slowing global growth will dampen economic momentum on a sequential basis