Friday, 20 Jun, 2025
By: Anshul Vipat
If the monetary institutions are to be believed Indian economy seems to be following global trends
It is not just the Rupee that is falling. GDP growth forecasts for the Indian economy are also falling at a regular interval. The latest institution to join this bandwagon is the Asian Development Bank. In a report released recently, the ADB lowered the 2022-23 GDP growth forecast to 7 percent down from a forecast of 7.2 early this year. According to the world body, price pressures will adversely impact domestic consumption, and sluggish global demand and elevated oil prices will likely be a drag on net exports.
Before this, the International Monetary Fund had lowered the 2022-23 GDP growth forecast to 7.4 percent; down from a forecast of 8.2 percent in April this year. Recently, Fitch ratings also slashed India's growth forecast for 2022-23 to 7 per cent from previous estimates of 7.8 per cent. Infact, most Indian and global institutions have lowered their GDP forecasts for India in recent months and the consensus seems to be that the GDP of the Indian economy will grow at anything between 7.2 percent to 7.8 percent in the current year. The only outliers are ratings agency Moody’s which till forecasts a GDP growth rate of 8.8 percent and Nomura that is being pessimistic with a GDP growth forecast of 4.7 percent.
If the monetary institutions are to be believed Indian economy seems to be following global trends. The latest World Economic Outlook predicts that global GDP growth will slow down to 3.2 percent in the current year as compared to the April estimate of 3.6 percent. Only India and Saudi Arabia are expected to grow by more than 7 percent. China, which has been the fastest growing major economy in the world for more than two decades is expected to show a GDP growth rate of just about 3.3 percent. Two other BRICS economies, South Africa and Brazil are expected to grow at 2.3 percent and 1.7 percent respectively while the GDP of Russia is expected to shrink by 6 percent.
Why has there been a cut in GDP growth?
GDP estimates are based on several factors. The Indian economy is currently in recovery mode after a record slump due to COVID-19 pandemic. Crude oil and other commodities like coal, fertlisers and natural gas has hit record high after the Russia-Ukraine disrupted global supply chain. This has swelled India's import bill. India’s trade deficit has ballooned to a record of $27.98 billion in August. Inflation rate also continues to remain outside RBI's comfort zone for record eight-months now.
The Reserve Bank of India has already been compelled to raise interest rates by more than 150 base points since May. The IMF as well as other institutions have cited these as, along with a virtual global recession as the major factors behind the downscaling of growth forecast.
However, even with the cut in GDP growth, India will continue to remain one of the fastest growing economy. Despite battling on two fronts - the pandemic and geopolitical complications, our economic indicators are better than rest of the world.
