S&P Forecasts India's FY23 GDP Growth At 7.3 Per Cent, Pegs Inflation Above 6 Per Cent

S&P Global Ratings has pointed out that elevated core inflation would drive up policy rates further in India, and projected policy interest rates to be 5.90 per cent by the end of this fiscal year

India’s economic growth in the current fiscal year is projected at 7.3 per cent with downside risks by S&P Global Ratings on Monday, the PTI reported. The rating agency said that inflation is likely to remain above the Reserve Bank of India’s (RBI’s) upper tolerance band of 6 per cent till the end of 2022.

In its Economic Outlook for Asia Pacific, S&P said India's growth next year will get support from domestic demand recovery after the coronavirus pandemic. "We have retained our India growth outlook at 7.3 per cent for the FY22-23 and 6.5 per cent for the next fiscal year, although we see the risks tilted to the downside," it said.

According to the PTI, other agencies have cut India's GDP growth forecast amid higher inflation and rising policy interest rates.

S&P Global Ratings has pointed out that elevated core inflation would drive up policy rates further in India, and projected policy interest rates to be 5.90 per cent by the end of this fiscal year.

Earlier this month, Fitch Ratings slashed the growth estimate to 7 per cent for the current fiscal from 7.8 per cent pegged earlier. India Ratings & Research too had reduced its projections to 6.9 per cent from 7 per cent earlier.

Asian Development Bank has cut the projection to 7 per cent from 7.5 per cent earlier.

The RBI expects the Indian economy to grow 7.2 per cent in the current fiscal (April-March). The growth last year (2021-22) was 8.7 per cent.

Indian economy expanded 13.5 per cent in the April-June quarter, sequentially higher than 4.10 per cent growth clocked in the January-March period.

On inflation, S&P Global Ratings pegged the average rate in the current fiscal at 6.8 per cent and projected it to fall to 5 per cent in the next fiscal beginning April 2023.

"India headline Consumer Price Inflation (CPI) is likely to remain outside the RBI's upper tolerance limit of 6 per cent until the end of 2022. That's amid substantial weather-induced wheat and rice price increases as well as sticky core inflation. And food inflation may rise again," it said.

Retail or consumer price inflation has remained above the central bank's upper tolerance threshold of 6 per cent for the eighth month in a row and was at 7 per cent in August. Wholesale price inflation remained in double digits for the 17th straight month and was at 12.41 per cent in August.