By Anjali Sharma
WASHINGTON – Global ratings agency Moody’s Ratings on Friday has raised its forecast for India’s real gross domestic product GDP growth in the current fiscal year to 7% from 6%, cited the resilience of the Indian economy despite the ongoing West Asia conflict.
Moody’s said India is expected to continue expanding faster than other G20 economies as well as emerging-market sovereigns with similar credit ratings.
The agency cautioned that risks to the outlook remain from developments in energy and food prices.
The ratings agency flagged elevated global energy prices as a key risk to India’s economic outlook.
A prolonged rise in energy costs could put pressure on inflation and household consumption while also weighing on overall economic growth.
Moody’s also highlighted the potential impact of an El Niño weather pattern, which could push up food prices and create additional inflationary pressures.
The higher food and energy costs could, in turn, affect consumer spending and economic activity, Moody’s noted.
Moody’s said the government’s response to the economic impact of the West Asia conflict has so far been relatively limited.
It noted a sustained increase in global energy prices could change the fiscal picture by increasing the need for subsidies or other forms of government support.
The higher spending on defence and infrastructure could make fiscal consolidation more challenging, the agency said.
The upgraded outlook came after India’s economy delivered stronger-than-expected growth in the April-June quarter.
The real GDP expanded 7.8% year-on-year, according to government data released last month, Moody’s stated.
The June-quarter performance was supported by a strong increase in investment and manufacturing activity, which helped offset weaker growth in mining and consumer-facing services.
Moody’s latest projection reflects a combination of stronger domestic economic momentum and India’s ability to absorb external shocks.
The agency’s warnings around crude oil, food inflation and government spending highlight the key factors that could influence India’s growth trajectory in the months ahead.
