S&P cuts India’s GDP growth forecast for FY23

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

S&P joins a host of agencies which have slashed India’s economic growth projections for current fiscal year citing slowdown in global economy, Russia-Ukraine war, besides rising interest rates and inflation domestically.

Goldman Sachs Group Inc. sees India’s economic growth slowing next year, citing a hit to consumer demand from higher borrowing costs and fading benefits from pandemic reopening, while lowering its growth forecast. Gross domestic product (GDP) may expand by 5.9% in calendar year 2023 from an estimated 6.9% this year, Goldman said in a report last week.

“Growth will likely be a tale of two halves, with a slower first half as the reopening boost fades, and monetary tightening weighs on domestic demand.. In the second half, growth is likely to re-accelerate as global growth recovers, drag from net exports diminishes, and investment cycle picks up,” the note stated. Goldman sees a pickup in investment cycle toward the second-half of 2023 aiding India’s growth rebound.

While the World Bank has pared its growth estimate for India by 100 basis points to 6.5%, IMF has trimmed it to 6.8% from 7.4%. Asian Development Bank too has cut projection to 7% from 7.5% earlier. RBI expects economic growth to be at 7% in current fiscal year.

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.

Global rating agency Moody’s Investors Service also slashed India’s economic growth forecast for 2022 to 7%, from 7.7% estimated earlier, citing monetary policy tightening, higher inflation, uneven distribution of monsoon, and slowing global growth.