Rating agency Moody's cut India's growth projections for the current and next calendar year due to higher inflation, high-interest rates, and slowing global growth that, it believes, will dampen economic momentum more than it had expected.
Moody's said it now expects India's GDP growth to slow to 7% in 2022 –– versus its previous estimate of 7.7% –– and then decelerate to 4.8% in 2023, before recovering to around 6.4% in 2024. The cuts in the growth forecast came as result of the geopolitical impact of the Ukraine-Russia war, the global tightening of countries, monetary policies as well as extremely persistent high inflation rates. Not just India but the world is set to face and economic slowdown, according to Moody’s.
Growth across the world will remain slow, the lowering forecasts are not just limited to India. We have lowered our global economic growth expectations. We expect real GDP growth of the G-20 economies to decelerate to 1.3% in 2023 significantly lower than our previous estimate of 2.1% and down from and estimated growth this year said the Moody’s statement.
Due to a series of factors, the sluggish pace of growth will continue until 2024. “Still, a period of relative stability could emerge by 2024 if governments and central banks manage to navigate their economies through the current challenges,” added the statement.
America, China, Japan and numerous other European countries’ forecasts have been downgraded, among others. The G-20 developing market countries have varying forecasts, especially since their markets depend largely on their economic structure. However, India and Brazil are less likely to face serious economic downturns. “Large domestically driven emerging market economies such as India and Brazil will be less vulnerable to weakening G-7 growth than will export-oriented countries,” added Moody’s.
This update comes a month after the IMF (International Monetary Fund) cut India’s GDP forecast for FY23 to 6.8%, from its previous estimate of 7.4%. The IMF believes that India’s GDP growth will slow down further to 6.1% in FY24. The World Bank also cut their FY23 projection of India’s GDP from their previous estimate of 7.5% to 6.5%. However, despite the cuts in India’s GDP projection, India remains one of the fastest developing global economies.
