S&P Global Ratings on Monday retained its 2023-24 GDP growth projection for India at 6%, but revised China’s growth projection for calendar year 2023 to 5.5% from 4.8% and said this will help other economies in the Asia-Pacific region “dampen but not offset” the effects of slower growth in the US and the EU.
The rating major said it expects the Reserve Bank of India to raise “its already high” policy rates further due to a recent upside surprise on inflation, adding that the pronounced core inflation in India suggests “little slack” in the economy. The RBI’s Monetary Policy Committee will convene on April 3 to review its stance amid calls from industry to pause rate hikes.
While India’s economy is traditionally driven by domestic demand, S&P Global averred it has become more sensitive to the global cycle lately, “in part due to rising commodity exports; and its year-on-year GDP growth slowed to 4.4% in the fourth quarter [of calendar year 2022]”.
The firm also flagged that “COVID-induced output losses in emerging market economies are likely to be permanent” with large gaps in market economies, particularly in India, the Philippines and Thailand”, when one compares “actual GDP in 2022 with the size of the economy along the trajectory for current estimates of trend growth since 2019”.
“In our view, India’s Consumer Price Index (CPI) inflation should moderate to 5% [from an average of 6.8% in 2022-23] in fiscal year 2024 (2023-24) but we also anticipate upside risks, including from weather-related factors,” the firm said in a research note.
