Three weeks ago, Moody’s financial services set India’s economic growth forecast at 9.5% for calendar year 2022 on account of high GST collections. Today, the company has revised its estimate at 9.1%.
9.1% is still higher than the forecast provided by the government of India, 8.9%. This move was expected as the GDP growth in Oct-Dec quarter was 5.4%, substantially lower than the estimated figure. The construction sector saw a contraction of 2.8% and growth in manufacturing sector was a meagre 0.2%.
The government’s estimate is lower than Moody’s because the government expects growth in the last quarter to be around 4.8% on account of the Russia-Ukraine war. High fuel prices and potentially elevated fertiliser costs are one of the major concerns.
The lower growth estimate is justified as India’s foreign exchange reserves declined $9.646 billion to $622.275 billion. It had grown last week and managed to touch a lifetime high of $642.45 billion in September 2021. Market intervention by the Central Bank, the dollar-swap auction worth $5 billion & fall in foreign currency assets can be held accountable for the decline.
Highlight by Aman Agarwal.