Moody’s Investors Service on Thursday slashed India’s economic growth projection to 8.8 percent for 2022 from 9.1 percent earlier, citing high inflation.
In its update to Global Macro Outlook 2022-23, Moody’s said high-frequency data suggest that the growth momentum from December quarter 2021 carried through into the first four months this year.
However, the rise in crude oil, food, and fertilizer prices will weigh on household finances and spending in the months ahead. Rate hike to prevent energy and food inflation from becoming more generalized will slow the demand recovery’s momentum, it said.
”We have lowered our calendar-year 2022 growth forecast for India to 8.8 percent from our March forecast of 9.1 percent while maintaining our 2023 growth forecasts at 5.4 percent,” Moody’s said.
Strong credit growth, a large increase in investment intentions announced by the corporate sector, and a high budget allocation to capital spending by the government indicate that the investment cycle is strengthening.
“But unless global crude oil and food prices rise further, the economy seems strong enough to maintain solid growth momentum,” Moody’s added.