Citing inflation, Moody's slashes India's GDP forecast to 8.8% for 2022

Moody’s Investors Service on Thursday (May 26) slashed India’s economic growth projection to 8.8 per cent for 2022 from 9.1 per cent earlier, citing high inflation.

In its update to Global Macro Outlook 2022-23, Moody’s said high-frequency data suggests 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 per cent from our March forecast of 9.1 per cent, while maintaining our 2023 growth forecasts at 5.4 per cent, Moody’s said.

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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.

(With inputs from agencies)