Moody’s Investors Service on Thursday raised India’s growth forecast to 9.5 per cent for the calendar year 2022 and to 8.4 per cent for the coming fiscal beginning April 1, even as it flagged high oil prices and supply distortions as a drag on growth.

“We have raised our 2022 calendar year growth forecasts for India to 9.5 per cent from 7 per cent, and maintained our forecast for 5.5 per cent growth in 2023. This translates into 8.4 per cent and 6.5 per cent in fiscal years 2022-23 and 2023-24, respectively,” Moody’s said in a statement.

In November last year, Moody’s had forecast India’s economy to expand 7.9 per cent in the 2022-23 fiscal beginning Aptil 1. As per official estimates, Indian economy is estimated to grow at 9.2 per cent in the current fiscal ending March 31.

The speed of the recovery from the first lockdown-led contraction in the June quarter of 2020 and subsequently in the June quarter of 2021 during the Delta wave was stronger than expected.

“… the economy is estimated to have surpassed the pre-COVID level of GDP by more than 5 per cent in the last quarter of 2021. Sales tax collection, retail activity and PMIs suggest solid momentum. However, high oil prices and supply distortions remain a drag on growth,” it said.

Moody’s said 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.

“Our 9.5 per cent growth forecast for 2022 assumes relatively restrained sequential growth rates; thus, there is upside potential to the growth rate. We estimate the carry-over from a strong finish to 2021 will add 6-7 per cent to this year’s annual growth,” it said.

The 2022 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 to raise the repo rate in the second half of this year, provided that growth momentum continues to improve,” Moody’s said. 

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