Moody's Investors Service on Thursday lowered calendar 2022 growth forecast for India to 8.8% from 9.1% it projected in March, saying higher prices of crude oil, food and fertiliser will weigh on household finances and spending in the months ahead. The rating agency maintained its 2023 growth forecast for India at 5.4%.
Moody's also slashed the growth projection for G20 economies to 3.1% in 2022, down from the 5.9% growth registered in 2021 when the recovery from the Covid-19 crisis was in full swing.
For India, it said high-frequency data suggest that the momentum from the fourth quarter of 2021 carried through into the first four months of this year because of strong reopening momentum.
Strong credit growth, a large increase in investment intentions announced by the corporate sector, and high budget allocation to capital spending by the government indicate that the investment cycle is strengthening, Moody's said in its report.
"However, the rise in crude oil, food and fertiliser prices will weigh on household finances and spending in the months ahead," it said, adding that rate increases to prevent energy and food inflation from becoming more generalised will impact the momentum of demand recovery. "But unless global crude oil and food prices rise further, the economy seems strong enough to maintain solid growth momentum," it added.