In light of the slowdown in global economy and its effects on India’s exports and industrial activity, Crisil on Monday lowered its forecast for India’s GDP for the current fiscal year from 7.3% to 7%. The rating agency also said that as global economy slows more quickly, the country’s gross domestic product (GDP) growth will be considerably slower, at 6% in FY24 as opposed to the 6.5% prediction made before.
The updated prediction for the current fiscal year is for 6.5% GDP growth in Q2 compared to 13.5% in Q1 and only 4.5% GDP growth in the second half. The impact of the global slowdown is anticipated to be greater next fiscal year, according to Crisil, which noted that domestic demand would continue to support growth in FY23 thanks to a catch-up in contact-based services and government capex, relatively accommodative financial conditions, and an overall normal monsoon.
It added that as interest rate increases were “transmitted more to consumers and the catch-up in contact-based services fades, domestic demand (during the next fiscal) could come under pressure.” The agency noted that since the 2000s, India’s growth cycles have been highly synchronized with those of the advanced nations, according to long-term growth movements. Or, to put it another way, the trend will continue to be accompanied by short-term demand variations.
The slowdown of the world’s largest developed economies will make India’s growth prospects more precarious. S&P Global had previously stated that slower growth in advanced economies, particularly the US and the eurozone, will cause a decline in global growth from 3.1% this year to 2.4% in 2023.