Moody's slashes India's GDP projection to 8.8% for 2022

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SME Times News Bureau | 26 May, 2022
Global financial services provider firm Moody's Investors Service has slashed India's GDP projection to 8.8 per cent for 2022, from 9.1 per cent estimated previously.

The rationale behind the cut was the prevailing high inflation.

"Except for Russia, we do not currently expect a recession in any G-20 country in 2022 or 2023," said Madhavi Bokil, Senior Vice President/CSR at Moody's on the global perspective.

"Still, there are multiple risks that could further undermine the economic outlook, including additional upward pressure on commodity prices, longer-lasting supply-chain disruptions, or a larger than expected slowdown in China."

Further, aggressive monetary tightening, amid worries of long-term inflation expectations getting unanchored, could also become a catalyst for a recession.

The next few months will be critical if the global economy can remain resilient over this period, the growth path could become more sustainable through next year, Moody's said.

Economies are returning to a post-pandemic normal, which involves reversals of some economic patterns to pre-Covid trends and permanent changes to others.

As pandemic disruption wanes, households are once again spending more of their incomes on high-contact service activities and buying fewer goods, it said.

As central banks shift to tighten monetary policy in response to higher inflation, there has been a rise in financial market volatility and asset repricing. Bond yields the world over have risen in anticipation of further interest rate hikes, equity prices have fallen from their peaks and the US dollar has strengthened, it added.

India's retail inflation accelerated to 7.79 per cent in April, remaining above the tolerance limit of central bank RBI for a fourth month in a row due to high fuel and food prices amidst Russia invasion of Ukraine.