India Ratings lowers economic growth forecast to 7-7.2% from 7.6% for 2022-’23

Credit rating agency India Ratings on Wednesday lowered its economic growth projection for the country between 7.0% and 7.2% from their previous estimate of 7.6% for 2022-’23.

The agency cited the Russia-Ukraine war and the rising prices of crude oil in international markets as the reason behind their revision.

Several countries placed sanctions on Russia after it invaded Ukraine on February 24. Since then, Russia, which is the world’s largest exporter of crude and fuels, has raised fears of supply disruption.

Higher costs are detrimental to India as it imports 85% of its crude oil. Government data showed that India only buys 3% of the oil supplies from Russia.

India Ratings said since the duration of the war remains uncertain, it expects India’s gross domestic product to grow at 7.2% if the crude oil prices remain elevated for another three months, and at 7.0% if they remain high for six months.

“Retail prices of petrol and diesel were on hold since early-November 2021,” India Ratings said in a press release. “However, they have begun to inch up from March 2022 almost on a daily basis.”

Since the revision in fuel prices began on March 22, petrol and diesel rates have increased by Rs 5.60 per litre in the country. At present, a litre of petrol costs Rs 101.01, while diesel is being sold at Rs 92.27 in New Delhi. However, fuel prices vary in states due to different value-added tax and freight charges.

In Wednesday’s revision, the agency estimated retail inflation to average between 5.8% and 6.2% as compared to its earlier forecast of 4.8%.

Meanwhile, on March 22, United States-based credit rating agency Fitch also downgraded India’s growth forecast for the next fiscal year to 8.5% from 10.3%.

It had also revised its forecast for the current financial year (2021-’22) from 8.1% to 8.7%, citing ease in restrictions imposed due to the Omicron variant of Covid-19.