Rating agencies are once again revising GDP growth estimates, with most now pegging it below 7%

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  • India’s GDP growth for the April-June quarter came in below estimates at 13.5%.
  • Rating agencies cut their annual growth rate projections after the government released quarterly data.
  • “We strongly believe that estimating the growth of the manufacturing sector requires serious introspection in the sense that the IIP is still pegged to the 2012 base,” SBI Ecowrap said.
  • Analysts fear that the organizations will not realize all the investment plans they have announced.

The GDP growth rate for the April-June quarter, which stood at 13.5%, was below expectations. As a result, rating agencies have already lowered their annual estimates.

Most forecasts now estimate that India’s GDP will grow by 7% or less. The Reserve Bank of India, however, estimates that it will grow by 7.2%.

SBI Ecowrap lowered its estimate as it expected April-June GDP growth of 15.7%. “We strongly believe that estimating growth in the manufacturing sector requires serious introspection in the sense that the IIP is still pegged to the 2012 base,” the report said.

Besides SBI Ecowrap, Citibank and Goldman Sachs also lowered their projections.

“Rising interest rates, uneven distribution of monsoons and slowing global growth will dampen economic momentum,” Moody’s said yesterday. It cut the growth rate projections for calendar year 2023 to 5.2%.

It is the second round of cuts by the agencies after seven of them slashed their growth rate projections after the government released January-March quarter data.

New round of downgrades

Institution Decline in FY23 GDP forecast Anterior projection
SBI 6.8% 7.5%
Citibank 6.7% 8%
Goldman Sachs seven% 7.2%

A lot has changed since the start of the year, as many agencies were expecting India’s GDP growth to be above 7%. A big jolt to that belief came in May even when subsequent projections were scaled back.

Degradations after the release of GDP data for the January-March quarter

Institution Decline in FY23 GDP forecast Anterior projection
Moody’s 5.2% (Calendar year 2023) 5.4%
YES Bank 6.9% seven%
International Monetary Fund (IMF) 7.4% 8.2%
nomura 4.7% 5.4%
FICCI seven% 7.4%
Asian Development Bank 7.2% 7.5%
CRISIS 7.3% 7.8%

The high inflation rate worries most analysts. “Growth challenges are expected to persist in FY23 and the K-shaped recovery is expected to continue. While many remain hopeful of a recovery in private sector capital spending, we remain skeptical as recent data from the RBI indicate that even though the number of projects announced for FY23 is higher than the previous year, the expected cumulative expenditure remains below pre-pandemic levels,” said a YES Bank report on August 31. Most analysts are concerned that organizations will not implement all the lofty capital plans they have announced, and they maintain a bias in favor of more downward revisions, unless domestic inflation does moderates or global commodity prices cool significantly.

“Overall, this confirms that the growth recovery is not so strong in India. This ideally implies that the monetary tightening is not very aggressive. However, it looks like the terminal repo rate will be 5.75-6% in this cycle with one or two more rate hikes, ending the cycle in December 2022,” said Motilal Group Chief Economist Nikhil Gupta. Oswal Financial Services.

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