Moody’s expects India’s GDP growth to slow to 7% in 2022 — down from the previous estimate of 7.7% — then slow to 4.8% in 2023, before increasing again to around 6.4% in 2024.
The Reserve Bank of India forecasts 7% growth in 2022/23.
“We expect the RBI to raise the repo rate by an additional 50 bps (basis points) as part of its objective to contain inflation expectations and support the exchange rate,” Moody’s economists wrote in the note.
“Ultimately, the RBI is likely to move from inflation management to growth considerations, provided the rate hike has the desired effect of taming inflationary pressures.”
The RBI has raised interest rates by 190 basis points since May to control inflation, which has remained above its 2-6% target range for most of this year.
Moody’s said the weak Indian rupee and high oil prices will continue to depress inflation.
The rating agency, however, said that India’s underlying growth momentum is fundamentally strong, thanks to a rebound in service activity.
“While these domestic strengths will continue to underpin the domestic growth story, global financial tightening and sluggish external demand will put pressure on growth in 2023.”
