Moody’s has revised its growth projections for 2023. Image for representational purposes only. | photo credit: Reuters
Moody’s Investors Service, the major player in global ratings, has lowered its GDP growth forecast for the Indian economy to 6.8% for 2022-23, from an earlier projection of 7%. At the same time, it raised the growth projection for 2023-2024 to 5.5% from the 4.8% rate it had forecast in November 2022.
India is among several G20 economies, including the United States, China, Russia and the Eurozone, whose growth projections for 2023 were raised by Moody’s in an update to its global macroeconomic outlook late February 28.
The company attributed the revisions to strong data from the second half of 2022 that “created significant carryover effects for 2023.”
“In the case of India, the upward revisions further incorporate the sharp increase in the capital expenditure budget allocation to ₹10 trillion (3.3% of GDP) for FY 2023- 24, compared to ₹7.5 trillion for the financial year ending Mar. 2023,” Moody’s explained.
In February, India’s manufacturing sector recorded the 20th consecutive month of output growth and new orders, most of which was driven by the domestic market as growth in export orders hit an all-time low in 11 months, according to the seasonally adjusted S&P Global India survey. Manufacturing Purchasing Managers Index (PMI). The index was at 55.3 in February, slightly below January’s 55.4. A reading of over 50 on the index indicates growth in activity.
Input costs rose at the fastest pace in four months in February, with companies citing higher prices for electronic components, energy, foodstuffs, metals and textiles. However, 94% of producers chose to absorb the higher costs rather than pass them on to buyers, and overall production costs rose at the slowest rate in three months.
Despite robust growth in new orders, job creation in the manufacturing sector, which had reached the slowest pace in January since September 2022 according to the PMI, fell further to grow only slightly in February.
“Companies reported only slight pressure on their own operating capacities, with outstanding business increasing slightly in February. As a result, total employment was little changed. Indeed, 98% of panelists reported no change in employment,” S&P Global said.
In January, the International Monetary Fund (IMF) in its World Economic Outlook report said it expects some slowdown in the Indian economy over the next fiscal year and projected growth of 6 .1% versus 6.8% in the current fiscal year ending March 31.