NEW DELHI: S&P Global Ratings on Wednesday downgraded India's GDP forecast for the current fiscal year from 7.8 percent to 7.3 percent, citing rising inflation and the longer-than-expected Russia-Ukraine conflict.
S&P noted in its Global Macro Update to Growth Forecasts that inflation staying higher for a long time is a concern, as it would force central banks to hike rates more than what is presently priced in, risking a more difficult landing, including a heavier damage to output and employment.
In December of last year, S&P forecasted 7.8 percent growth in India's GDP in the fiscal year 2022-23, which began on April 1, 2022.
The current fiscal year's growth forecast has been lowered to 7.3 percent. The next fiscal year's growth is expected to be 6.5 percent. "Since our last forecast cycle, the risks to our forecasts have increased and remain solidly on the downside. According to S&P, "the Russia-Ukraine war is more likely to linger on and escalate rather than terminate sooner and deescalate, boosting the risks to the downside." The Indian economy grew by 8.9 percent in the previous fiscal year, according to estimates (2021-22). S&P forecasted 6.9 percent CPI or retail inflation for the current fiscal year.
Various international institutions have recently lowered India's growth prediction in the light of the Russia-Ukraine conflict and rising commodity prices. In April, the World Bank lowered India's GDP forecast for fiscal 2022-23 to 8 percent from 8.7 percent previously expected, while the IMF lowered its projections to 8.2 percent from 9 percent.