Highlights

  • Moody's cites high inflation as main reason for lower forecast
  • Projected inflation to be around 6.8 per cent and 5.2 per cent over the next 2 years

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Moody’s slashes India’s GDP forecast due to high prices

“We have lowered our calendar-year 2022 growth forecast for India to 8.8 per cent from our March forecast of 9.1 per cent."

Moody's Investors Service slashed India's economic growth projection to 8.8 per cent for 2022 from 9.1 per cent earlier, citing high prices as the main culprit.

Moody's stated that the rise in crude oil, food and fertilizer prices will weigh on household finances and spending in the months ahead. It also added that rate hikes to prevent energy and food inflation from becoming more generalized will slow the demand recovery's momentum.

"We have lowered our calendar-year 2022 growth forecast for India to 8.8 per cent from our March forecast of 9.1 per cent, while maintaining our 2023 growth forecasts at 5.4 per cent,” Moody's said.

Earlier this month, S&P Global Ratings had cut India's growth projection for 2022-23 to 7.3 per cent, from 7.8 per cent earlier, on rising inflation and longer-than-expected Russia-Ukraine conflict.

In March, Fitch had cut India growth forecast to 8.5 per cent, from 10.3 per cent, citing sharply high energy prices on account of Russia-Ukraine war.

India has seen 13 consecutive month of double digit inflation on WPI and the CPI as well has been above the RBI's threshold for 4 months prompting out of turn rate hikes.

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