New Delhi: Moody’s Investors Service on Wednesday raised India’s economic growth forecast for 2023 to 5.5 per cent from 4.8 per cent on the back of a sharp increase in capital expenditure in the Budget and a resilient economic momentum.
However, it cut India’s growth forecast for 2022 to 6.8 per cent from 7 per cent in November last year.
In its February update of the Global Macro Outlook 2023-24, Moody’s raised “significantly” the baseline 2023 real growth projections for several G20 economies, including the US, Canada, the euro area, India, Russia, Mexico and Turkey. Strong finish to 2022.
“In the case of India, a sharp increase of ₹10 trillion (3.3 per cent of GDP) has additionally been included in the capital expenditure budget allocation for the fiscal year 2023-24, to ₹7.5 trillion for the fiscal year ending March. 2023,” Moody’s said, projecting 2023 real GDP growth at 5.5 per cent and 2024 growth at 6.5 per cent, a rise of 70 basis points.
It said that India’s growth projection has been “significantly raised” as strong data in the second half of 2022 has a large carry-over effect for 2023.
Moody’s said economic momentum in several large emerging market countries, including India, proved stronger than anticipated in the global and domestic financial environment last year.
The tightening of monetary policy in the US will ultimately help to stabilize if not improve capital flows to emerging market countries. However, as long as inflation is firmly under control in advanced economies, emerging markets will remain vulnerable to financial market volatility.
With regard to global growth, Moody’s said the year 2023 began on an optimistic note for the global economy, with positive surprises on several fronts, including the lifting of COVID-related restrictions in China, unseasonably warm weather that left Europe with energy shortages, Helped deal with it. The crisis ended better than expected, and financial conditions improved.
Nevertheless, Moody’s expects global growth to slow in 2023, with a growing drag from cumulative monetary policy on economic activity and employment in most major economies. “We forecast that G-20 global economic growth will decline from 2.7% in 2022 to 2% in 2023, and then improve to 2.4% in 2024.”
For China, Moody’s forecasts GDP growth of 5 percent in 2023, up from 3 percent in 2022.