Moody's Investors Service revised its growth projections for the US, the euro area, and China for 2023 and produced a macro-outlook for G20 economies. Also, the growth forecasts for India, Mexico, Russia, Saudi Arabia, and Turkey have been increased by the credit rating agency.

Moody's has increased its earlier forecast of 5% real GDP growth for India to 5.5% in 2023 and 6.5% in 2024. The upward revisions for India also include a considerable increase in the budgetary allotment for capital expenditures, which has been increased from Rs. 7.5 lakh crore for the fiscal year ending in March 2023 to Rs. 10 lakh crore (3.3% of GDP) for the fiscal year 2023–24.

According to Moody's, the economic growth in a number of significant emerging market nations, such as India, Brazil, Mexico, and Turkey, has shown to be more resilient than expected to the tightening of the domestic and international financial environment during the past year.

According to Moody's, a future easing of the tightness of US monetary policy will assist stabilise, if not enhance, capital flows to developing nations. But, unless inflation in advanced economies is effectively under control, emerging markets will continue to be susceptible to spikes in financial market volatility.

Moody's said, inflation will continue to decline, although a steady decline to central bank targets is not certain. Inflation in the US decreased somewhat in January from 7.1% in December to 6.4% in January, although it remains significantly above than the target of 2%.

The US central bank's current policy rate range, which is between 4.50% and 4.75%, is the highest in 15 years. It's noteworthy that in the first half of 2022, it was nearly zero. Raising interest rates is a monetary policy instrument that typically reduces inflation by reducing economic demand.

According to Moody's, growth in the G20 economies would slow from 2.7% in 2022 to 2% in 2023 before picking up to 2.4% in 2024. The growth prediction for the G20 advanced economies is now 2.3%, up from the previous projection of 2.1%.
Also, the rating agency projects that the advanced economies of the G20 would grow by 0.8% in 2021, above the prior projection of 0.2%. In addition, Moody's anticipates an acceleration in real GDP growth from 3.5% in 2022 to 3.9% in 2023, an increase of 0.8 percentage points from its November projections.

"There is no doubt that the end of tightening monetary policy is in sight, but it is unclear how long and by how much rates will need to rise in the future. If improving financial conditions undermine the Fed's and other central banks' efforts to restrain aggregate demand, they will be pushed to adopt even more stringent policy tightening "says Moody's.

India's Q3 2022-23 GDP grew at 4.4 pc

India's April-Jan fiscal deficit looms large on-year to Rs 11.91-LaCr

India's economic indicators show re-acceleration: Morgan Stanley