After witnessing a sharp Covid-induced contraction of 6.7% in 2020, India grew 8.2% in 2021, according to Moody’s.

Global rating agency Moody’s on Thursday lowered its growth forecast for India for the calendar year 2022 from 9.5% previously announced to 9.1%. capital expenditures. It also marginally lowered its 2023 growth forecast for the country to 5.4%.

Given the sharp rise in oil prices, the agency has sharply raised its inflation forecast for India to 6.6% for 2022 and 5% for 2023, an increase of 160 basis points and 80 basis points respectively from previous projections.

According to government data, retail inflation averaged 5.4% between April and February. It peaked at an eight-month high of 6.07% in February, after breaking the upper bound of the Reserve Bank of India’s (RBI) medium-term target of 2-6% for the second straight month.

In its latest report on Global Macro Outlook 2022-23, Moody’s said global economic growth will also suffer and inflation will increase as a result of Russia’s invasion of Ukraine. The conflict has significantly changed the global economic backdrop through three main channels: rising commodity prices, risks to the global economy from financial and business disruptions, and dented sentiment from heightened geopolitical risks.

“India is particularly vulnerable to high oil prices as it is a major importer of crude oil,” the agency said. However, it also noted that the country’s agricultural exports will benefit in the near term from high prevailing prices as India has a grain surplus. “High fuel and potentially fertilizer costs would later weigh on public finances, potentially limiting planned capital expenditures,” it said. “Our forecast revisions also take into account the slightly stronger underlying momentum than we had previously misunderstood,” it added.

After witnessing a sharp Covid-induced contraction of 6.7% in 2020, India grew 8.2% in 2021, according to Moody’s.

The report said Russia is the only G-20 economy to contract in the next two years, as it forecasts a 7% contraction for Moscow by 2022 and 3% for 2023, down from growth rates of 2% and 2%, respectively. 1.5%. for the invasion of Ukraine. The Chinese economy is expected to grow by 5.2% in 2022 and 5.1% in 2023, it added.

Commenting on the global economy, the agency stressed that the potential for new Covid waves, monetary policy missteps and social risks associated with high inflation could dampen growth prospects.

“The new negative energy price shock carries the risk that inflation will permeate longer and will also lead to higher interest rates, further weakening consumer spending and private investment,” the report said.

Disruptions in the supply of metals and other minerals from Russia and Ukraine are disrupting the recovery of the supply chain.
“High prices of consumer commodities, such as food and energy, will negatively impact sentiment. All in all, these factors will further slow down economic growth in the coming quarters.

In addition, the increase in fuel and metal prices will continue to weigh on supply-side cost pressures.

Delays in fresh production and freight issues will limit output capacity. On the demand side, some countries may resort to subsidies to reduce the financial burden of higher prices. Such a move will only serve to keep demand for commodities artificially high, adding further global price pressures, the agency said.

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