Global rating major Moody’s Investors Service has scaled down its GDP growth forecast for India’s economy to 6.8% for 2022-23, from an earlier projection of 7%. At the same time, it has raised the growth projection for 2023-24 to 5.5% from the 4.8% rate it had reckoned in November 2022.
India is among several G20 economies, including the U.S., China, Russia and the Euro area, whose 2023 growth projections were raised by Moody’s in an update to its global macroeconomic outlook on late February 28.
The firm attributed these revisions to strong data from the second half of 2022 that “created large carry-over effects for 2023”.
“In the case of India, the upward revisions additionally incorporate the sharp increase in capital expenditure budget allocation to ₹10 trillion (3.3% of GDP) for the fiscal year 2023-24, up from ₹7.5 trillion for the fiscal year ending in March 2023,” Moody’s explained.
In February, India’s manufacturing sector clocked the 20th successive month of output growth and new orders, most of which was driven by the domestic market as growth in export orders hit an 11-month low, as per the Survey-based seasonally adjusted S&P Global India Manufacturing Purchasing Managers’ Index (PMI). The Index was at 55.3 in February, fractionally below the 55.4 in January. A reading of over 50 on the index indicates growth in activity.
Input costs surged at the fastest pace in four months in February, with firms mentioning higher prices for electronic components, energy, foodstuff, metals and textiles. However, 94% of producers opted to absorb the higher costs rather than pass them on to buyers, and overall output charges rose at the slowest rate in three months.
Despite robust growth in new orders, job creation in the manufacturing sector, which had hit the slowest pace in January since September 2022 as per the PMI, dropped further to grow only fractionally in February.
“Companies signalled only mild pressure on their own operating capacities, with outstanding business increasing marginally in February. As a result, there was little change to overall job numbers. Indeed, 98% of panellists reported no change in employment,” S&P Global said.
In January, the International Monetary Fund (IMF) in its World Economic Outlook report said it is expecting some slowdown in the Indian economy next fiscal year and projected the growth to 6.1% from 6.8% during the current fiscal ending March 31.