Moody's lowers India GDP growth forecast for 2022 by 30 basis points

"However, the rise in crude oil, food and fertiliser prices will weigh on household finances and spending in the months ahead," the ratings agency said in an update to its Global Macro Outlook report.

The forecast is likely to be raised again next month after data released on May 12 showed consumer price index (CPI) inflation had surged to a 95-month high of 7.79 per cent in April.

Moody's sees inflation in India averaging 6.8 per cent in 2022 before easing to 5.2 per cent in 2023.

"Rate increases to prevent energy and food inflation from becoming more generalised will slow the demand recovery's momentum. But unless global crude oil and food prices rise further, the economy seems strong enough to maintain solid growth momentum," Moody's was quoted as saying by a news agency.

The cut in India's growth forecast for 2022 by Moody's comes as part of a broader downward revision for global growth due to the Russia-Ukraine war and zero-COVID policy lockdowns in China adding to supply shocks and pushing inflation higher.

Moody's now sees advanced economies growing 2.6 per cent in 2022, down from 3.2 per cent it had forecast in March. Emerging market economies, on the other hand, are forecast to grow by 3.8 per cent in 2022, down from the previous forecast of 4.2 per cent.

In 2023, advanced and emerging market economies are seen growing by 2.1 per cent and 4.2 per cent respectively.

"Three key developments will influence macroeconomic conditions over the next two years: One, the evolution of the Russia-Ukraine military conflict, two, the speed and extent of global monetary tightening, and three, the trajectory of China's economy," Moody's said.

It expects the Chinese economy to grow by 4.5 per cent in 2022 and 5.3 per cent in 2023, with risks to the downside.

Fibre2Fashion News Desk (DS)