S&P lowers India FY23 GDP growth forecast by 30 bps to 7%

S&P Global Ratings on November 28 lowered India's FY23 GDP growth forecast by 30 bps to 7 percent and lowered it a 50-basis-point more to 6 percent for FY24.

The credit rating agency had in September projected India's economic growth at 7.3 percent for the current fiscal.

According to the S&P's quarterly economic update for Asia-Pacific, strong consumption in the more domestically led economies of India, Indonesia, and the Philippines will also lift the average.

S&P said in some countries the domestic demand recovery from Covid has more to go and this should support growth next year in India.

It projected inflation to average 6.8 percent in the current fiscal and the RBI's benchmark interest rate to rise to 6.25 percent by March. To control the price rise, the central bank has hiked the interest rate by 1.9 percentage points to a 3-year high of 5.9 percent.

India's wholesale and retail inflation fell in October after remaining high for most part of the year mainly due to supply chain disruptions following the outbreak of the Russia-Ukraine war in February.

Retail or CPI inflation fell to a three-month low of 6.7 percent, while wholesale or WPI inflation was at a 19-month low of 8.39 percent last month.

With regard to exchange rate, S&P said foreign reserves have fallen in Asian emerging markets, even after adjusting for valuation changes. It pegged the exchange rate at Rs 79.50 to a dollar by March-end, as against the current Rs 81.77 to a dollar.

"In India, the decrease in foreign currency reserves of $73 billion through August was far and above the losses attributable to valuation changes (of $30 billion). This implies that the central bank has made sizeable interventions to support the Indian rupee," it said.

Commenting on China's economic growth, S&P highlighted that the country's growth is likely to remain subdued in the coming months, but it will pick up in 2023 as the government eases its Covid stance and the property market stabilises.

Amid hefty US interest rate hikes and deteriorating current account positions in several countries, some central banks will need to lift the rates more than inflation considerations warrant, it added.