Moody’s lowers India growth estimate for CY22 to 9.1% on Ukraine conflict

Rating agency Moody’s on Thursday scaled down India’s economic growth forecast by 40 basis points to 9.1 per cent in CY2022 due to adverse effects of the Russia-Ukraine conflict on the global economy.

Last month, it had revised India’s economic growth estimates in CY2022 upwards to 9.5 per cent from 7 per cent on stronger than expected recovery after lockdown in 2020 and delta wave of Covid-19 in 2021.

Moody’s, in a statement, said India is particularly vulnerable to high oil prices given that it is a large importer of crude oil. However, the country is a surplus producer of grain and agricultural exports will benefit in the short term from high prevailing prices.

High fuel and fertiliser costs would weigh on government finances down the road, potentially limiting planned capital spending. “For all of these reasons, we have lowered our 2022 growth forecasts for India by 0.4 percentage point,” it said.

“We now expect the economy to grow by 9.1 per cent this year, followed by 5.4 per cent in 2023. Our forecast revisions also factor in the somewhat stronger underlying momentum than we had not accounted for previously,” Moody’s added.

Russia’s invasion of Ukraine has significantly altered the global economic backdrop through three main channels. First, the spike in commodities prices driven by existing and expected supply shortages is creating risks of damagingly high input costs and consumer inflation over an extended period.

Second, financial and business disruption poses risks to the highly integrated global economy. Third, heightened security and geopolitical risks will exert economic costs and weigh on the economy by denting sentiment. “We have lowered our baseline growth forecasts to capture these shifts in the global economic environment”, it added.

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