Moody's cuts India CY22 GDP growth forecast to 7.7% from 8.8%

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Moody’s Investors Service on September 1 lowered its gross domestic product (GDP) growth forecast for India to 7.7 percent for the calendar year 2022 (CY22) due to rising interest rates, uneven monsoon, and slowing global growth.

The global credit rating agency also lowered India's GDP forecast for CY23  to 5.2 percent from 5.4 percent.

"Our expectation that India’s real GDP growth will slow from 8.3 percent in 2021 to 7.7 percent in 2022 and to decelerate further to 5.2 percent in 2023 assumes that rising interest rates, uneven distribution of monsoons, and slowing global growth will dampen economic momentum on a sequential basis," the agency said in a note.

Also read: IMF cuts India's FY23 growth forecast by 80 bps to 7.4%

In its update to Global Macro Outlook 2022-23, Moody's said that inflation remains a challenge with the Reserve Bank of India (RBI) having to balance growth and inflation, while also containing the impact of imported inflation from the year-to-date depreciation of the Indian rupee against the US dollar of around 7 percent.

The report said inflationary pressures will weaken in the second half of the year and further next year.

In addition, economic growth would be stronger than we are projecting in 2023 if the private-sector capex cycle were to gain steam, it added.

"A quicker letup in global commodity prices would provide significant upside to growth," it said.

Also read: GDP growth surges to 13.5% in April-June on favourable base, but misses estimates

"High-frequency data for the Indian economy shows strong and broad-based underlying momentum in the first four months of the fiscal year 2022-23. Services and manufacturing sectors have seen robust upswings in economic activity, according to hard and survey data, such as PMI, capacity utilization, mobility, tax filing and collection, business earnings and credit indicators," it added.

In May, Moody's slashed India's economic growth projection to 8.8 percent for 2022 from 9.1 percent earlier, citing high inflation.

As per official GDP estimates, the Indian economy expanded 13.5 percent in April-June 2022-23, higher than the 4.10 percent growth clocked in the previous March quarter.