Global rating agency Moody’s Investor Service on Wednesday raised India’s economic growth forecast to 5.5% in 2023 from 4.8% pegged earlier, due to higher capital expenditure proposed in the Budget and a sustained economic momentum. It has, however, revised downwards India’s growth estimate for 2022 to 6.8% from 7% pegged in November last year.
The forecast comes just a day after the second advance estimates of national income retained India’s GDP growth at 7% for 2022-23. For fiscal 2023-24, the Reserve Bank of India has projected real GDP growth at 6.4% while the Economic Survey had estimated it in the range of 6% to 6.8%.
In its February update to Global Macro Outlook 2023-24, Moody’s raised the baseline 2023 real growth projections meaningfully for several G-20 economies including the US, Canada, the euro zone, India, Russia, Mexico and Turkiye, accounting for a stronger end to 2022. It attributed this upward revision to “strong data” in the second half of 2022, which “created large carry-over effects for 2023”.
“In the case of India, the upward revisions additionally incorporate the sharp increase in capital expenditure budget allocation to `10 trillion (3.3% of GDP) for the fiscal year 2023-24, up from `7.5 trillion for the fiscal year ending in March 2023,” it noted. Growth is estimated to rebound to 6.5% in 2024.
The agency further said that the economic momentum in a number of large emerging market countries, including India, Brazil, Mexico and Turkiye, has proved more resilient to last year’s tightening in the global and domestic financial environment than it had anticipated.
In addition, the agency said: “The year started on a seemingly optimistic note for the global economy following positive surprises on several fronts. Still, we expect global growth to slow in 2023, with increasing drag from the cumulative monetary policy tightening on economic activity and employment outcomes in most major economies.” It expects global growth to slow to 2% in 2023 from 2.7% in 2022 before recovering to 2.4% in 2024.
It also expects inflation to moderate but a sustained decline in central bank targets is not guaranteed. For India, it has pegged inflation to ease from 6.7% in 2022 to 6.1% in 2023 and further to 5.1% in 2024.
In its February policy, the RBI had projected inflation at 6.5% in 2022-23 and 5.3% in 2023-24.