Wednesday, 09 Oct, 2024
By: Anshul Vipat
Inflation rate continues to remain outside RBI's comfort zone for record nine-months now. Image source: IANS
The GDP growth forecasts for the Indian economy is falling at a regular interval. If anything, the yesterday's inflation figure released by the RBI confirms the worst fears for Indian economy
On Wednesday, the International Monetary Fund (IMF) came up with its GDP forecasts. This showed that India continues as one of the fastest growing economies in the world with an average growth of 6 percent yearly, way higher than then the global average of 3 percent. However, there is another side of coin. The GDP growth forecasts for the Indian economy is falling at a regular interval. If anything, the yesterday's inflation figure released by the RBI confirms the worst fears for Indian economy.
In its annual World Economic Outlook report, the IMF put India's GDP growth at 6.8 per cent in 2022 - a 0.6 percentage point downgrade since the July forecast of 7.4 percent. Even the July forecast was lower than 8.2 per cent projected in January this year. And IMF isn't the only one that has slashed its projection. Last week, the Asian Development Bank lowered the 2022-23 GDP growth forecast to 7 percent down from a forecast of 7.2 early this year. Before this, Fitch had 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 7.5 percent to 6.8 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.
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, fertilisers 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 nine-months now. Just yesterday, the RBI released its inflation numbers that showed that retail inflation based on the consumer price index has climbed yet again to 7.41 percent in September, 2022, significantly higher than the 7 percent recorded in August.
Most worrying is the data on food inflation that has hit the highest mark in last 22 months. Inflation rate for vegetables was a distressingly high 18.05%. This must be really hurting the pockets of lower income Indians as food has a weight of 54% in the consumer price index.
