On Monday, S&P Global Ratings predicted that India’s economic growth will be 7.3% in the current fiscal year, with downside risks. They also stated that inflation is anticipated to continue to be over the RBI’s upper tolerance barrier of 6% till the end of 2022.
India’s economy would be aided by a rebound in domestic demand following the coronavirus outbreak, according to S&P’s Economic Outlook for Asia Pacific. Although we believe the risks are more to the negative, we have maintained our India growth projection at 7.3% for the fiscal years 2022—2023 and 6.5% for the following fiscal year, the report added.
Amid rising policy interest rates and greater inflation, some organizations have lowered their predictions for India’s GDP growth. Fitch Ratings reduced the growth projection for the current fiscal year from a previously targeted 7.8 percent to just 7% earlier this month. The forecasts made by India Ratings & Research were also lowered from 7% to 6.9%.
The prediction was formerly 7.5%, but the Asian Development Bank has decreased it to 7.0%. According to the Reserve Bank of India (RBI), the Indian economy would expand by 7.2% during the current fiscal year (April-March). Growth in the previous year (2021—2022) was 8.7%.
The Indian economy grew 13.5% from April to June, which was larger than the 4.10% growth recorded from January to March. S&P Global Ratings estimated that the average inflation rate for the current fiscal year was 6.8% and predicted that it will drop to 5% for the following fiscal year starting in April 2023.
“The Reserve Bank of India’s maximum tolerance level of 6% for headline Consumer Price Inflation (CPI) in India is projected to be exceeded by the end of 2022. The weather-related price hikes for wheat and rice are significant, and core inflation has been stuck at high levels. And food inflation may increase once again, “It stated.
Retail or consumer price inflation has exceeded the Reserve Bank of India’s upper tolerance limit of 6% for the eighth consecutive month, peaking at 7% in August. For the 17th consecutive month, wholesale price inflation stayed above 10%; in August, it was 12.41%.
S&P Global Ratings predicted that policy interest rates in India will reach 5.90% by the end of this fiscal year as a result of rising core inflation. The central bank has already increased benchmark interest rates from 1.40 % to 5.40 % in an effort to control persistently rising inflation. The RBI is anticipated to raise rates by a further 50 basis points to a three-year high of 5.90% at its monetary policy review on September 30.
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