Tuesday, August 9, 2022
HomeMoney & LoansAnalysts slash India's GDP forecast amid high inflation, recession fears

Analysts slash India’s GDP forecast amid high inflation, recession fears




High inflation, subsequent monetary tightening and looming global recession have led to various analysts cutting India’s GDP forecast for 2022-23(FY23). On Thursday, the Asian Development Bank (ADB) lowered India’s growth forecast from earlier 7.5 per cent to 7.2 per cent for FY23.



On July 18, US-based Morgan Stanley also slashed India’s GDP growth forecast for FY23 from 7.6 per cent to 7.2 per cent. For FY24, the growth estimates have been set at 6.4 per cent.


Days before Morgan Stanley, Nomura, another financial service company, lowered the GDP growth forecast from 5.4 per cent to 4.7 per cent for the current financial year. In June, World Bank also slashed the forecast from 8 per cent to 7.5 per cent.


Higher oil prices and surging inflation figures have been the top reasons for the agencies to announce the revision in the figures. Manila-based ADB also revised India’s retail inflation forecast for FY23 from 5.8 per cent to 6.7 per cent, on Thursday, in line with RBI’s projection of 5.7 per cent.


FICCI, an industry group, also revised India’s GDP growth forecast downwards to 7 per cent from 7.4 per cent on Thursday, blaming geopolitical uncertainty and its impact on the Indian economy.


As Russia and Ukraine are major suppliers of oil and other commodities like wheat and fertilisers to the world, the ongoing war in Ukraine has created supply-side constraints, pushing inflation figures higher.


Also, oil prices have surged from $40 per barrel in July 2020 to $100 per barrel in July 2022. Oil is used in the transportation of all goods across the globe, and a rise in its price generally snowballs into a hike in the general level of prices in the economy.


As a result, the retail inflation figures in India have stayed above the Reserve Bank of India’s (RBI’s) upper tolerance level of 6 per cent for six consecutive months. For three months, it has stayed above 7 per cent.


In April, May and June, the retail inflation figures stood at 7.8 per cent, 7.04 per cent and 7.01 per cent, respectively.


To tame inflation, the RBI has also hiked the benchmark interest rate, repo rate, by 90 basis points since May. After a two-year hiatus, the repo rate was hiked by 40 basis points to 4.4 per cent on May 4, in a surprise announcement.


Just a month after that, on June 8, the repo rate was hiked further by five basis points to 4.9 per cent.


The central bank had also slashed India’s GDP growth forecast for FY23 from 7.8 per cent to 7.2 per cent in April. In June’s Monetary Policy announcement, the forecast was kept the same.

mail Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor



RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular

Recent Comments

%d bloggers like this: