Pegging India's gross domestic product (GDP) growth at seven per cent for 2022 and six per cent for 2023, global credit rating agency S&P Global Ratings said the forecast has been lowered by 0.5 per cent for next two fiscal years.
In a research report S&P Global Ratings said India's forecast has been lowered by 0.5 percentage points for the next two fiscal years on slower global demand. Regional growth remains healthy overall.
Meanwhile at global level, S&P Global Ratings said, global activity has held up surprisingly well so far despite a torrid pace of policy rate hikes and consistently high geopolitical uncertainties.
"Recent outperformance will not last in our view. We see significant slowdowns ahead. Labour markets are key to determining the depth of the downturn," the report said.
Getting inflation under control while minimizing damage to output remains the main macro policy challenge; the lagged effects of rate hikes will make assessing this difficult. Given the big inflation miss over the past two years, policymakers will err on the tough side, the report said.
According to S&P Global Ratings, its forecasts are generally higher for 2022 relative to the previous round, but broadly unchanged for 2023-2025.
Inflation forecasts are higher and stickier. Risks are on the downside. The year 2023 will be a revelatory one.
"We will learn how much monetary tightening is needed to curb inflation, how deep any recession will be, and the early contours of the post-Covid-economy. We suspect the post-Covid world will differ from the pre-Covid world across several dimensions," S&P Global Ratings said.
China's recovery in Q3, driven in part by state-financed industrial production growth, masked underlying weaknesses. Organic growth remained soft and sentiment remained weak amid a broadly unchanged Covid stance and a property downturn, the report states.
Growth in the rest of Asia is holding up well, with the more domestically oriented economies of India and Indonesia outperforming.