Moody’s ups Indian economic growth estimate for 2023 to 5.5 %

Moody’s on Wednesday (March 1) upped India’s economic growth estimate for 2023 to 5.5 per cent from the earlier 4.8 per cent, thanks to a sharp hike in capital expenditure in the country’s budget and a resilient economic momentum.

Moody’s Investors Service, however, pushed downwards India’s growth estimate for 2022 to 6.8 per cent from 7 per cent forecast in November last year.

In its February update to Global Macro Outlook 2023-24, Moody’s raised the baseline 2023 real growth projections “meaningfully” for several G20 economies including the US, Canada, the Euro area, India, Russia, Mexico, and Turkey, accounting for a stronger end to 2022.

“In the case of India, the upward revisions additionally incorporate the sharp increase in capital expenditure budget allocation to Rs 10 trillion (3.3 per cent of GDP) for fiscal 2023-24, up from Rs 7.5 trillion for the fiscal year ending in March 2023,” Moody’s said.

2024 growth

It projected a 70 basis points increase in 2023 real GDP growth at 5.5 per cent and the 2024 growth at 6.5 per cent. It said India’s growth projection has been “meaningfully raised” as strong data in the second half of 2022 created large carry-over effects for 2023.

Also read: Moody’s cuts India’s economic growth projections to 7% for 2022

Moody’s said economic momentum in a number of large emerging market countries, including India, has proved more resilient to last year’s tightening in the global and domestic financial environment than it had anticipated.

An eventual let-up in monetary policy tightening in the US will help stabilize, if not improve, capital flows to emerging market countries. However, until inflation in advanced economies is firmly in check, emerging markets will remain vulnerable to bouts of heightened financial market volatility, it said.

Optimistic note

With regard to global growth, Moody’s said 2023 began on a seemingly optimistic note for the global economy following positive surprises on several fronts.

These included the lifting of COVID-related restrictions in China, unseasonably warm weather that helped Europe cope with the energy crisis far better than had been expected as well as improved financial conditions.

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Still, Moody’s expects global growth to continue to slow in 2023, with increasing drag from cumulative monetary policy tightening on economic activity and employment in most major economies.

“We forecast G-20 global economic growth will downshift to 2 per cent in 2023 from 2.7 per cent in 2022, and then to improve to 2.4 per cent in 2024.”

For China, Moody’s estimated GDP growth at 5 per cent in 2023, up from 3 per cent in 2022.

(With agency inputs)