India Ratings has cut its growth forecast due to rising uncertainty due to Russia-Ukraine war and consequently affecting consumer sentiment.
GDP Forecast Slashed: Rating agency ‘India Ratings’ has reduced India’s GDP growth rate estimate from 7 to 7.2 percent for the financial year 2022-23. The agency had earlier projected a growth rate of 7.6 percent. India Ratings has cut its growth forecast due to rising uncertainty due to Russia-Ukraine war and consequently affecting consumer sentiment. India Ratings says that due to uncertainty about when the war will end, crude oil prices may remain high for three months in the first scenario. At the same time, its second trend is that prices can remain at higher levels for six months.
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Growth rate may remain 7-7.2 percent
Rating agency Chief Economist Devendra Pant and Principal Economist Sunil Kumar Sinha said on Wednesday that if crude oil prices remain elevated for three months, GDP growth in the fiscal year 2022-23 could be 7.2 per cent. Is. At the same time, if the prices remain high even after this, then the GDP growth rate will be even less i.e. 7 percent. Both these figures are lower than the earlier estimate of 7.6 percent of the GDP growth rate.
He further said that the size of the economy in these two scenarios in the coming financial year will be 10.6 percent and 10.8 percent respectively less than the GDP trend value of 2022-23. According to the report, consumer demand has been weak in 2021-22. However, the demand for everyday items increased during festivals. But given the rising inflation, it is doubtful that this demand will continue. People’s spending on non-essential items will come down.
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Rising commodity prices due to the ongoing war in Ukraine, rising consumer inflation may further weaken consumer sentiment. The rating agency estimates that the expenditure on private consumption will be 8.1 percent and eight percent, respectively, in the first and second scenarios as against the earlier estimate of 9.4 percent. Coming to inflation, the report cautioned that a 10 per cent increase in crude oil prices without adding to the depreciation of the currency could push retail inflation up to 0.42 per cent and wholesale inflation by 1.04 per cent. Similarly, a jump of 10 per cent in sunflower oil could increase retail inflation by 0.12 per cent and wholesale inflation by 0.024 per cent.
(Input-PTI)