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Credit Rating giant Moody's has downgraded the GDP growth prospects of India in its recent report, doing so for the second time in 2022 itself.
For the uninformed, Moody's Investors Services is a credit rating agency that was founded in 1900. It provides investors with credit ratings, risk analysis, and research for stocks, bonds, and government entities. It also develops software and tools to help capital markets with risk management, credit analysis, and economic research. The agency has a presence in 40+ countries, employs over 13,000 employees, and has an experience of over 100 years.
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In an update to its Global Macro Outlook 2022-23, the agency reduced the GDP growth projection from 8.8% to 7.3% for CY22, lowering it for the second time in 2022 itself (the first one being in May 2022 from 9.1% to 8.8%). Moreover, it also reduced its projection for CY23 from 5.4% to 5.2%.
Recently, India's GDP grew by 13.5% in the April-June quarter, its highest in almost a year. The agency's report stated that the services and manufacturing sectors saw robust upswings in economic activity during the quarter while showing strong, broad-based momentum for our country in the first 4 months of 2022-23 using factors like PMI, tax filing, mobility, and other credit indicators.
Its report stated that India's central bank was to face the main challenge of balancing inflation and growth while containing the fallout of import inflation against the Indian rupee's current depreciation. However, it suggests that will weaken in the second half of this year and reduce further during the next.
"Our revised projections reflect the hit to households' purchasing power from unrelenting inflation and rapid tightening of global financial conditions because of the hawkish policy pivot of central banks, particularly that of the Fed. COVID-19 restrictions in China and cuts in Russian gas supply to Europe are weighing on the economic outlooks for advanced and emerging economies," said Moody’s.
According to Moody's, developed economies of the G-20 will have a growth rate of 2.1% in 2022 & 1.1% in 2023. On the other hand, the developing members of the G-20 have been forecasted to observe a growth of 3.3% & 3.8% in 2022 & 2023 respectively.
Article by Aman Agarwal.
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