Moody’s Slashes India's 2022 Growth Estimate to 9.1% Due to Higher Fuel, Fertilizer Bills
PTI
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New Delhi: Moody's on Thursday, March 17, slashed India's growth estimate for the current year to 9.1%, from 9.5% earlier, saying high fuel and fertilizer import bills could limit the government's capital expenditure.
In its March update of the Global Macro Outlook 2022-23 report, the rating agency said that economic growth will suffer "as fallout from Russia's invasion of Ukraine builds". It said Russia's invasion of Ukraine has significantly altered the global economic backdrop through three main channels: spike in commodities prices, risks to global economy from financial and business disruption and dent in sentiment due to heightened geopolitical risks.
It said Russia is the only G-20 economy that will contract this year and forecast that its economy will shrink 7% in 2022, and 3% in 2023, down from projected growth of 2% and 1.5% respectively, before the invasion of Ukraine.
With regard to India, it said the country is particularly vulnerable to high oil prices, given that it is a large importer of crude oil. Because India is a surplus producer of grain, agricultural exports will benefit in the short-term from high prevailing prices.
"High fuel and potentially fertilizer costs would weigh on government finances down the road, potentially limiting planned capital spending."
"For all of these reasons, we have lowered our 2022 growth forecasts for India by 0.4 percentage point. We now expect the economy to grow by 9.1% this year," Moody's Investors Service said.
It forecast growth for 2023 at 5.4%.
The year-end inflation for India has been projected at 6.6% in 2022.
The Indian economy grew 8.2% in the 2021 calendar year, after a 6.7% contraction in 2020, largely due to lockdowns in light of the COVID-19 pandemic.
With regard to the global economy, Moody's said the potential for new COVID-19 waves, monetary policy missteps, and social risks associated with high inflation could dampen the growth outlook.
Moody's projected China's economy to grow 5.2% in 2022 and 5.1% in 2023.
(PTI)
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