Home / News / India /  S&P puts India's FY23 GDP growth at 7.3%, inflation at 6.8% for this fiscal

S&P Global Ratings projects India's economy to grow by 7.3% by end of the FY23 fiscal. High oil prices, a slowdown in global demand for the country's exports, and multi-year high inflation are seen as the causes of downward pressure on economic growth. The rating agency predicts India's CPI inflation at 6.8% for the current fiscal. On the other hand, factors like the normal monsoon, and a rebound in contact-based services will support the growth.

Although S&P expects solid economic growth in 2022-2023, especially in economies relatively led by domestic demand including India, Indonesia, and the Philippines. However, there are downward pressures that will act as spoilsports for India's growth.

In its Economic Outlook Asia-Pacific Q3 2022 report, S&P said, "We expect India's GDP to grow by 7.3% in the fiscal year 2023 compared with 7.8% three months ago."

In the report, S&P highlighted the causes of this downward pressure on growth are high oil prices, slowing global demand for India's exports, and high inflation.

In August, India achieved merchandise export of $33 billion almost at similar levels of $33.38 billion in August 2021. Meanwhile, India’s merchandise imports climbed by 36.78% to $61.68 billion in August 2022 against $45.09 billion in August last year. The widening in trade deficit more than doubled to $28.68 billion in August against $11.71 billion in August last year.

From April to August 2022, India's merchandise exports stood at $192.59 billion up by 17.12% from $164.44 billion in the same period a year ago. Imports continue to rise more than exports. In the first five months of FY23, merchandise imports grew by 45.64% to $317.81 billion from $218.22 billion in the corresponding period last year. The trade deficit widened by more than 2-folds to $125.22 billion (April - August 2022) compared to $53.78 billion in the same period last year.

Among the economies S&P covers, the report said, "CPI inflation is the highest in India, where a relatively unresponsive supply side has kept inflation elevated. High fuel and commodity prices triggered the initial rise in inflation, but it has become broad-based and persistent. Despite relatively weak consumer demand in many pockets, core inflation remains elevated as companies protect margins by passing on the rising input costs to consumers. The rebound in contact-based services is also contributing to inflation. We expect consumer inflation of 6.8% this fiscal year, and 5.8% for the last quarter January-March 2023."

India's CPI inflation jumped to 7% in August compared to 6.71% in July this year due to high food prices. Inflation stays above RBI's upper tolerance limit for eight consecutive months.

"The latter is curbing the purchasing power of the poor because energy and food, key drivers of current inflation, account for a chunk of their consumption basket," S&P's note added.

On the contrary, S&P said, "there are also factors supporting growth. A normal monsoon is a forecast for 2022. This will support agriculture production and help control food inflation. A rebound in contact-based services--as vaccination penetration improves and people learn to live with the virus--will also boost growth."

S&P expects India's GDP growth at 6.5% for the next fiscal year, while the growth is factored at 6.7% for the financial year 2024-25.

In the first quarter of FY23, India's real GDP is estimated at 36.85 lakh crore, as against 32.46 lakh crore in Q1 2021-22, showing a growth rate of 13.5%. While the gross value added (GVA) growth stood at 12.7% in Q1FY23.

The rating agency expects the Indian rupee to be at 78 against the dollar by the FY23 end. However, S&P expects the rupee to reach 79.50 against dollar by end of the next fiscal. But, it expects rupee at 81 against dollar by FY25 end and at 82 by FY26 end.

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