S&P Global Joins List of Agencies Slashing India’s FY23 Growth Forecasts: Drivers?

By Malvika Gurung

Investing.com -- The credit rating agency S&P Global (NYSE: SPGI ) Ratings has joined the cohort of multiple agencies slashing India’s growth rate estimates, downgrading it to 7.3% from 7.8% for the ongoing fiscal FY23.

In Dec last year, the American rating agency had estimated India’s GDP growth at 7.8% in FY23.

The projection cut is a result of soaring inflation and longer-than-expected geopolitical disturbances caused by the Russia-Ukraine crisis.

In its Global Macro Update to Growth Forecasts, S&P Global Ratings has warned that rising inflation levels for a long time is a cause of concern and needs the central bank’s intervention, which means increasing interest rates to tame the soaring figures.

However, this would have to come in more than the currently priced-in rate hike estimates, in turn risking a larger hit to output and employment.

"The risks to our forecasts have picked up since our last forecast round and remain firmly on the downside. The Russia-Ukraine conflict is more likely to drag on and escalate than end earlier and de-escalate, in our view, pushing the risks to the downside," stated S&P.

For FY24, the agency has pegged India’s growth at 6.5% and estimates the domestic economy to have clocked a GDP growth of 8.9% in FY22.

The CPI inflation for the ongoing fiscal year is estimated at 6.9%, cited a PTI report.

Besides S&P Global, the World Bank, IMF, Asian Development Bank, RBI, Morgan Stanley (NYSE: MS ), and UBS, have pared their FY23 GDP forecasts for India.