S&P Global Ratings have maintained their 2022/23 growth forecast for India’s economy at 7.3%.

Although the rating agency predicts inflation will average at 6.8% through the year, they forecast additional ‘material’ increases in policy rates due to soaring core inflation. The exchange rate for the Rupee is forecast to average at 79 to the U.S. Dollar this year, and edge down to 80.5, 82 and 83 until 2025/26. 

Retail inflation in India is expected to remain above 6% until the end of this year, according to the rating agency’s chief economist, Louis Kuijs. S&P forecasts average inflation of 5% in 2023/24.

Although the agency has held on to its prior growth forecast for India, despite other downgrades - including from the Asian Development Bank and Fitch Ratings, who forecast 7% growth in 2022 and Moody’s Investors Service with 7.6% - S&P predicts growth to remain under 7% for the next three years.

The agency has forecast real GDP growth of 6.5% in 2023/24, 6.7% in 2024/25 and 6.9% in 2025/26. Growth for 2022/23 was previously set at 7.8%, but it was downwardly revised to 7.3% in May due to inflationary pressures.

“We have retained our India growth outlook at 7.3% for the fiscal year 2022-2023 and 6.5% for the next fiscal year, although we see the risks tilted to the downside. In some countries, the domestic demand recovery from COVID-19 has further to go… (and) should support growth next year in India,” the firm said within an economic outlook research note.

“More domestic demand-oriented economies are less exposed to the global slowdown. We expect a larger slowdown in 2023 in South Korea and Taiwan than in India, Indonesia, and the Philippines,” S&P added.

“But in some economies, it is too early to conclude that a downward trend has started. For instance, in India headline, Consumer Price Inflation (CPI) is likely to remain outside the Reserve Bank of India's upper tolerance limit of 6% until the end of 2022. That's amid substantial weather-induced wheat and rice price increases as well as sticky core inflation. And food inflation may rise again,” the note said.