S&P Global Ratings on Wednesday cut India’s growth projection for the current fiscal to 7.3% from 7.8% earlier on rising inflation and the longer-than-expected Russia-Ukraine conflict.
In its Global Macro Update to Growth Forecasts, S&P said inflation remaining higher for long is a worry, which required central banks to raise rates more than what was currently priced in, risking a harder landing, including a larger hit to output and employment.
S&P had in December last year pegged India’s GDP growth in the 2022-23 fiscal, which began on April 1, 2022, at 7.8%.
The growth projection has been cut to 7.3% for the current fiscal. For the next fiscal, the growth has been pegged at 6.5%. “The risks to our forecasts have picked up since our last forecast round and remain firmly on the downside. The Russia-Ukraine conflict is more likely to drag on and escalate than end earlier and deescalate, in our view, pushing the risks to the downside,” S&P said. Indian economy is estimated to have clocked a GDP growth of 8.9% in the last fiscal (2021-22). S&P pegged CPI or retail inflation in the current fiscal at 6.9%.
In the aftermath of the Russia-Ukraine war and rising commodity prices, various global agencies have cut India’s growth forecast recently. The World Bank in April slashed India’s GDP forecast for fiscal 2022-23 to 8% from 8.7% predicted earlier, while IMF has cut the projections to 8.2% from 9%.
Asian Development Bank (ADB) has projected India’s growth at 7.5%, while the RBI, last month, cut its forecast to 7.2% from 7.8% amid volatile crude oil prices and supply chain disruptions due to the ongoing Russia-Ukraine war.
