Tribune News Service
New Delhi, October 12
Amid the lowering of India’s growth forecast by international agencies, S&P Global Ratings has said the country’s economy is facing a mix of issues that could shake its sovereign credit metrics.
On the positive side, the Indian economy is battling inflation and tightening financial conditions both at home and globally, the strong economic growth is counter-balancing the high fiscal deficits and debt burdens.
But the increased bill for commodity imports, including energy, could increase the current account deficit to 3% of GDP this fiscal from 1.6% of GDP last year owing to increased import bill. “If the current account deficit remains higher for longer compared with our current base case forecasts, it would impinge on India’s external balance sheet,” cautions the S&P report.
S&P expects the RBI to have a policy rate of nearly 6% by March 31, 2023, and this high rate along with faster price increases could soften near-term growth momentum.
“We believe a deeper global economic slowdown than we currently anticipate could have an adverse impact on India’s economic performance in fiscals 2023 and 2024. Potential channels of risk for India include tighter global monetary conditions, prolonged high inflation, and poor investment or consumer sentiment both at home and abroad,” said S&P Global.
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