aBy early 2022-23, the Indian economy was expected to grow anywhere between 7.2%, according to Reserve Bank of India estimates, and 8.2%, according to International Monetary Fund Forecast, with major rating agencies and financial institutions presenting their estimates. Moderation in economic growth was no big deal, after bouncing back 8.7% from a COVID-triggered nadir last year, as the ripple effects of the war began in Europe and inflation was high since January. By early September, most forecasts ranged from 6.7%-7.7%. reserve Bank of India, Asian Development BankAnd Fitch Ratings has lowered its estimate to 7%. S&P Global Ratings maintains its forecast 7.3% and . Feather Moody’s Investors Service reduced it to 7.6%, but both believe that an emerging global recession will not derail the post-COVID recovery. The outlook is no longer so gentle, World Bank has suggested, based on recent inputs as of the last week of September. From its initial expectation of 8% growth this year, which was lowered to 7.5% in June, the bank has taken a dismal outlook, with only 6.5% growth citing the deteriorating external environment.
High-frequency economic indicators point to healthy growth through August, after a 13.5% expansion in the April-June quarter. But growth appears to have moderated in September with goods export contracts contracting for the first time since February 2021 and import growth slowing sharply, indicating a slowdown in domestic demand. The bank’s latest forecast suggests a relative slowdown starting in the October-December quarter, with tighter global liquidity, higher inflation (oil prices rising again after the OPEC meeting) and rising interest rates to dampen domestic demand. has decreased. At the same time, demand for exports will further reduce and private investment will prefer to sit out of this period of potential uncertainty. Private consumption, in particular, will be impacted this year and next, the bank has acknowledged, especially as the pandemic’s scars on income and employment levels remain for rural and low-income households. It is estimated that in 2020 at least 56 million Indians will have slipped below the poverty line. The government is concerned about “entering an era of robust growth”, but its decision to expand the pandemic-driven free food program shows that not all actors in the economy have managed to get out of the woods yet. This realism should also be reflected in the other policy choices it makes, with caution silencing optimism.