The Indian Wire » Business » Economy » Moody’s Trims India’s CY22 Growth Rate To 8.8%, Says Inflation Weighing On Household Finances & Spendings 
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Moody’s Trims India’s CY22 Growth Rate To 8.8%, Says Inflation Weighing On Household Finances & Spendings 

Moody’s Trims India’s CY22 Growth Rate To 8.8%, Says Inflation Weighs On Household Finances & Spending

Moody’s Investors Service has trimmed India’s growth forecast for the calendar year 2022 to 8.8% from the earlier projected growth of 9.1% in March while keeping the country’s 2023 growth forecasts at 5.4 percent.

Moody’s stated that a hike in crude oil, food, and fertilizer prices burden household finances and spending. At the same time, interest rate hikes to combat inflation will lower the pace of demand recovery’s momentum.

Moody’s sees inflation to average 6.8% through 2022, saying that the Indian economy appears firm to keep solid growth momentum — unless global crude oil and food prices escalate again.

“Although we expect headline inflation rates to ease through next year, price levels remain high and will weigh on consumer demand,” noting that inflation and interest rate hikes will slow India’s economic growth.

“High-frequency data suggest that the momentum from Q4 2021 [October to December] carried through into the first four months of this year because of strong reopening momentum,” the firm noted in the May update of its Global Macro Outlook 2022-23 about the country’s recent economic course.

“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. However, the rise in crude oil, food, and fertilizer prices will weigh on household finances and spending in the months ahead,” it added. 

Global Outlook : 

Moody’s forecasts the global economic growth to further slacken to 2.9 percent in 2023, a notch below the average growth rate ten years before the 2020 pandemic. 

The rating agency also trimmed 2022 growth projections for G-20 economies to 3.1 percent, lower than 5.9 percent growth in 2021. 

“Except for Russia, we do not currently expect a recession in any G-20 country in 2022 or 2023,” said Madhavi Bokil, Senior Vice-President at Moody’s.

“Still, there are multiple risks that could further undermine the economic outlook, including additional upward pressure on commodity prices, longer-lasting supply-chain disruptions, or a larger than expected slowdown in China. Aggressive monetary tightening, amid worries of long-term inflation expectations getting unanchored, could also become a catalyst for a recession,” she added.

The advanced economies may see a growth rate of 2.6 percent in 2022, 1.2 percent less than what emerging market countries could witness.

In its earlier forecast, Moody’s predicted the advanced and the emerging markets to grow at 3.2 percent and 4.2 percent, respectively.

 Moody’s said the post-pandemic global economic recovery would face a new set of complex challenges. 

“Several crosscurrents have hit the global economy all at once and will slow growth more significantly than we envisaged only a few months ago. The economic spillovers of the Russia-Ukraine military conflict are still unfolding, as is the effect on global growth from the slowdown in China amid strict enforcement of its zero-Covid policy. Although we expect headline inflation rates to ease through next year, price levels remain high and will weigh on consumer demand,” it added.

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