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Moody's ups India's growth forecast to 9.5% for 2022

In November last year, Moody's had forecast India's economy to expand 7.9 per cent in the 2022-23 fiscal beginning April 1
Last Updated 24 February 2022, 14:20 IST

Moody's Investors Service on Thursday raised India's economic growth forecast for the year 2022 to 9.5 per cent from 7 per cent earlier on the back of better than expected economic recovery post the first and second Covid waves and tax collections, but cautioned that high oil prices and supply distortions may pose a drag.

''We have raised our 2022 calendar year growth forecast for India to 9.5 per cent from 7 per cent and maintained our forecast for 5.5 per cent growth in 2023...," Moody's Global macroeconomic outlook update for 2022-23 said.

Sales tax collection, retail activity and PMIs (Purchasing Managers Indices) suggest solid momentum, it said.

Read more: GDP to be just 1% above pre-pandemic level in FY22: RBI dy governor

"However, high oil prices and supply distortions remain a drag on growth".

"As is the case in many other countries, the recovery is lagging in contact-intensive services sectors, but it should pick up as the Omicron wave subsides. With most remaining restrictions now being lifted with the improvement in the Covid situation, including the reopening of schools and colleges for in-person instruction across various states, the country is on its way to normalcy," it said.

The rating agency said the Union Budget prioritises growth, with a 36 per cent increase in allocation to capital expenditure to 2.9 per cent of GDP for the fiscal year 2022-23, which the government hopes will crowd in private investment. With the RBI leaving interest rates unchanged at its February meeting, monetary policy remains supportive.

''We expect the RBI to begin tightening liquidity measures and raise the repo rate in the second half of this year, provided that growth momentum continues to improve,'' it said.

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(Published 24 February 2022, 09:34 IST)

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