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After Moody's and Fitch slashed their Indian economic growth forecasts, S&P has come out with its own projection for the Indian economy. According to the agency, India's GDP growth during the current fiscal is estimated to be 7.3% by the end of the current fiscal.
Standard & Poor (S&P) is one of the Top 3 credit rating agencies in the world, alongside Moody's and Fitch Ratings, with a history dating back to the 1860s! The agency is an issuer of credit ratings for companies and debt obligations covering multiple industries, benchmarks, asset classes, and geographies and is credited with the creation of the famous S&P 500 index.
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S&P's evaluation comes after several entities like the OECD, ADB, Fitch, Moody's, Ind-Ra & Citigroup reduced their respective projections for Indian economic growth to around 7%.
In its Economic Outlook for APAC, the agency stated that the external environment of the countries in the region has turned unfavorable and higher global interest rates would continue to depreciate the local currency and increase pressure on the respective central banks.
The region saw a growth of 4% growth in the April-June quarter, the same as the two preceding quarters. The slowdown in China due to its strict lockdowns was parried by India's rebound in consumption.
For India, the agency said that Inflation was expected to stay above 6% for the remainder of 2022, having stayed over the same for the past 8 months. For the last quarter of FY23, the agency has estimated a 5.8% inflation rate in India.
"We have retained our India growth outlook at 7.3 percent for 2022-2023 and 6.5 percent for the next fiscal year, although we see the risks tilted to the downside,” S&P Global APAC Chief Louis Kuijs said.
Moreover, as the US Fed tightened its monetary policy, there has been significant dollar strength which has resulted in a weakness in major global currencies. The Indian rupee currently trades near Rs 81.93 per dollar, down 9.5% against the greenback this year.
Furthermore, the agency has also stated that due to high core inflation, policy rates could jump higher. This is after the RBI has already increased rates to 5.4%. On 30th September, the RBI is expected to hike the rate by another 50 bps to reach 5.9%.
Article by Aman Agarwal.
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