American business and financial services company Moody’s Corporation on Thursday raised India’s economic growth forecast for the calendar year 2022 from 7 percent to 9.5 percent. It has also raised the economic growth for the 2022-23 fiscal year to 8.4 percent.
“We have raised our 2022 calendar year growth forecast for India to 9.5 per cent from 7 per cent, and maintained our forecast for 5.5 per cent growth in 2023. This translates into 8.4 per cent and 6.5 per cent in fiscal years 2022-23 and 2023-24, respectively,” Moody’s said in a statement.
Moody’s has cited a subsiding 3rd wave of COVID19 and associated reduction in public restrictions along with robust growth in consumer consumption which will power the country’s growth engine.
“As is the case in many other countries, the recovery is lagging in contact-intensive services sectors, but it should pick up as the Omicron wave subsides. With most remaining restrictions now being lifted with the improvement in the COVID situation, including the reopening of schools and colleges for in-person instruction across various states, the country is on its way to normalcy,” Moody’s further said in a statement.
However, the corporation did cite high oil prices coupled with pandemic-induced disruption of critical supply chains across the world (such as semiconductors, etc.) which will impede the economic recovery.
“… the economy is estimated to have surpassed the pre-Covid level of GDP by more than 5 per cent in the last quarter of 2021. Sales tax collection, retail activity and PMIs suggest solid momentum. However, high oil prices and supply distortions remain a drag on growth,” it further said.
The reduction in public activities, including reopening of schools and colleges, and a productive budget which has allocated 36 percent to capital expenditure, will play a critical role in the GDP growth, increase private investment as well as job creation.
The pragmatic monetary by the RBI will also provide impetus to the economic activity. This will spur the revenue-generation across sectors especially on the back of a healthy economic growth in the fiscal year 2021-22.
“Our 9.5 per cent growth forecast for 2022 assumes relatively restrained sequential growth rates; thus, there is upside potential to the growth rate. We estimate the carry-over from a strong finish to 2021 will add 6-7 per cent to this year's annual growth,” it noted.
“We expect the RBI to begin tightening liquidity measures and raise the repo rate in the second half of this year, provided that growth momentum continues to improve,” the report further said.
The Reserve Bank of India (RBI) recently predicted that the Indian economy will grow by 7.8 percent in the fiscal year 2022-23.