S&P Global Ratings has retained India’s economic growth projection at 7.3 percent for FY23, but said that higher interest rates will continue to exert pressure on central banks in APAC region in the form of capital outflows and currency depreciation.
On the inflation projection, the ratings agency said inflation is likely to remain above the upper tolerance limit of 6 per cent till the end of 2022.
S&P Global Ratings Asia-Pacific Chief Economist Louis Kuijs said a pronounced slowdown in China was offset by a strong rebound in India as consumption, especially of services, continued to recover and investment grew rapidly.
“We have retained our India growth outlook at 7.3 percent for the fiscal year 2022-2023 and 6.5 percent for the next fiscal year, although we see the risks tilted to the downside,” Kuijs said.
The Reserve Bank expects the Indian economy to grow 7.2 percent in the current fiscal (April-March). The growth last year (2021-22) was 8.7 percent.
The Indian economy grew 13.5 percent in the April-June quarter, sequentially higher than the 4.10 percent growth clocked in the January-March period.
Several other agencies, including ADB, Fitch Ratings and Citigroup, have already slashed India’s growth projections to either 7 percent or below.
ADB and Fitch pegged India’s growth estimate at 7 percent, while Ind-Ra, SBI and Citigroup expect it to be 6.9 percent, 6.8 percent and 6.7 percent, respectively.
S&P Economist Vishrut Rana said the rupee may continue to see volatility in the coming days, but India has ‘substantial buffer’ to withstand foreign fund outflows.
There have been increased capital flow pressures globally as the US Fed briskly tightens monetary policy. This has led to significant US dollar strength, and global currencies are down against the greenback.
On Monday, the rupee touched a record low of 81.52 to a dollar. The local currency has depreciated 9.4 percent against the greenback so far this year.
