Moody's Improves India's Economic Growth Forecast In Latest Projection: Here's Why

Global rating agency Moody's Investors Service has lowered its GDP growth forecast for India's economy by 0.2 percentage points from its previous projection of 7% in November 2022 to 6.8% for 2022.

What Happened? Moody’s on Wednesday raised India’s economic growth estimate for 2023 to 5.5% from 4.8% pegged earlier, on the back of a sharp increase in capital expenditure in the Budget and a resilient economic momentum.

However, the agency reduced India’s growth estimate for 2022 to 6.8% from 7% pegged in November last year.

In its February update to Global Macro Outlook 2023-24, Moody’s raised the baseline 2023 real growth projections ‘meaningfully’ for several G20 economies, including the United States, Canada, the Euro area, India, Russia, Mexico, and Turkiye, accounting for a stronger end to 2022.

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The upward revisions for India also account for a significant increase in capital expenditure budget allocation to ₹10 lakh crore (3.3% of GDP) for the fiscal year 2023-24, up from ₹7.5 lakh crore for the fiscal year ending in March 2023.

The global research and risk analysis firm believes that an eventual easing-off in monetary policy tightening in the United States “will help stabilise, if not improve, capital flows to emerging market countries.”

That said, until inflation in advanced economies is firmly in check, emerging markets will remain vulnerable to bouts of heightened financial market volatility, the firm says.

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