Moody’s forecasts India’s growth rate to be 9.5 percent for 2022
Moody’s Investors Service on Thursday raised India’s growth forecast to 9.5 per cent for calendar year 2022 and 8.4 per cent for the coming fiscal year beginning April 1, even as it braced for higher oil prices. And marked supply distortions as a drag on growth.
“We have raised our 2022 calendar year growth forecast for India from 7 per cent to 9.5 per cent, and maintained our forecast for growth of 5.5 per cent in 2023. This will increase to 8.4 per cent and 6.5 per cent in fiscal year 2022-23. and 2023-24, respectively,” Moody’s said in a statement.
In November last year, Moody’s projected India’s economy to expand by 7.9 per cent in the 2022-23 fiscal year starting from April 1. According to official estimates, the Indian economy is projected to grow by 9.2 per cent in the current financial year ending March 31.
The pace of recovery from the first lockdown-led contraction during the delta wave in the June quarter of 2020 and later in the June quarter of 2021 was stronger than expected.
“… the economy has surpassed the pre-COVID level of GDP by over 5 per cent in the last quarter of 2021. Sales tax collections, retail activity and PMI suggest solid momentum. However, Higher oil prices and supply distortions remain a drag on growth,” it said.
Moody’s said that as in many other countries, recovery in contact-intensive service areas is lagging, but should accelerate as the omicron wave subsides.
With the COVID situation improving, including the reopening of schools and colleges for in-person instruction in various states, with most of the remaining restrictions now lifted, the country is moving towards normalcy.
“Our 9.5 per cent growth forecast for 2022 assumes a relatively moderate sequential growth rate; thus, the growth rate is likely to pick up. We estimate a strong end to 2021 carry-over to this year’s annual growth rate of 6-7 per cent. will add growth,” it said.
The Union Budget for 2022 prioritizes a growth of 2.9 per cent of GDP along with a 36 per cent increase in the allocation of capital expenditure for the financial year 2022-23, which the government expects will crowd out private investment. With the RBI leaving interest rates unchanged in its February meeting, monetary policy remains supportive.
“We expect the RBI to begin tightening liquidity measures and raise the repo rate in the second half of this year, provided that growth momentum continues to improve,” Moody’s said.
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