S &P Global Ratings on May 18 trimmed India’s FY23 growth forecast to 7.3 percent from 7.8 percent projected in March, considering higher commodity and crude oil prices, inflation, and the Ukraine war. The country, however, will remain the fastest growing major economy in the world.
As reported by Mint, S&P said at the beginning of 2022, it looked as if for most economies, the effects of covid were retreating and the question was when they will regain the pre-pandemic trajectory of output. However, the macro picture changed following the outbreak of the Russia-Ukraine war in February, which led to a spike in energy and commodity prices.
"The weakness in China, spillovers from the war in Ukraine, domestic monetary tightening, and rapidly tightening global financial conditions are headwinds for emerging market economies," Mint reported quoting S&P Global saying so.
“Emerging markets in Asia are the most at risk from weakening consumption in China.” It said they are also among the most at risk from supply-chain disruptions. S&P also raised Consumer Price Index-based inflation for India to 6.3 percent, up by 90 basis points (bps) from March estimates, the Mint report added.
Inflation is another factor which is impacting growth. It is broad-based and more persistent than anticipated even a few quarters ago.
Inflation in the US, UK and India are at a multi-year high level. Central banks across the globe have been signalling aggressive rate hikes in the coming months which may hit the global growth.
A sharp jump in crude oil prices is a matter of serious concern for India as the country is one of the biggest importers of crude oil.
chief economic adviser V. Anantha Nageswaran, at the Amazon Sambhav Summit, a virtual event on the digital economy and job creation, told India is well-placed among its global peers amid global uncertainty.
Nageswaran said the monetary tightening the world over, the lockdown, and the economic slowdown in China are dampening demand for crude oil.
“So, I think it is going to be obviously a volatile and turbulent year with a lot of uncertainties. India will not be exempt from that. But I think in the global comity of nations and relatively speaking, India is better placed to handle the fallout,” Mint reported him saying so.