What Is Hurting India's Growth

Economy

- M.G. Arun

A host of global agencies as well as the Reserve Bank of India (RBI) have revised India’s growth estimates for the year 2022-23—and beyond. All of them underline the fact that the economy continues to be vulnerable to a slew of external shocks as well as high inflation and rising interest rates that will dampen demand on the domestic front. These call for an urgent need to boost demand through better job creation, while pumping up government spending on infrastructure projects, as the Centre moves closer to its annual budget presentation on February 1.

Goldman Sachs Group Inc, for instance, sees India’s economic growth slowing next year, citing a hit to consumer demand from higher borrowing costs and fading benefits from the pandemic reopening. Lowering its growth forecast in a report, it now says India’s gross domestic product (GDP) is expected to expand only by 5.9 per cent in the calendar year 2023—its earlier estimate was 6.9 per cent. Meanwhile, ratings firm Crisil has trimmed its GDP growth forecast for 2022-23 to 7 per cent from 7.3 per cent. Crisil also expects India’s GDP growth to slow to 6 per cent in fiscal 2024, down from the 6.5 per cent estimated previously, as global growth is expected to fall faster next fiscal. In addition, domestic demand could come under pressure as interest rate hikes get transmitted more to consumers, and the benefits from a revival in contact-based services such as retail and hospitality fade, it said. In November, Moody's cut its India GDP growth forecast for 2022 to 7 per cent from its earlier estimates of 7.7 per cent. RBI, too, has revised its GDP growth rate estimates for 2022-23 to 7 per cent from 7.2 per cent. Meanwhile, in the second quarter of this fiscal, the economy grew at 6.3 per cent, lower than the expectations of most analysts.