Moody’s Investor Service on Wednesday conveyed that they have revised the economic growth estimate of India for 2023 to 5.5 percent from the earlier projections of 4.8 percent due to a strong increase in the capital expenditure in the budget and resilient economic momentum.

However, the rating agency has revised downward its growth estimate for 2022 to 6.8 percent from 7 percent pegged in November last year.

 Moody’s February update to Global Macro Outlook 2023-24 raised the baseline 2023 real growth projections “meaningfully” for several G20 economies, including the US, Canada, the Euro area, India, Russia, Mexico, and Turkiye, accounting for a stronger end to 2022.

“In the case of India, the upward revisions additionally incorporate the sharp increase in capital expenditure budget allocation to Rs 10 trillion (3.3 percent of GDP) for the fiscal year 2023-24, up from Rs 7.5 trillion for the fiscal year ending in March 2023,” Moody’s said, projecting a 70 basis points increase in 2023 real Gross Domestic Product (GDP) growth at 5.5 percent and 2024 growth at 6.5 percent.

Moody has noted that India’s growth projection has been “meaningfully raised” due to strong data in the second half of 2022.  Economic momentum in a number of large emerging market countries, including India, has proved more resilient to last year’s tightening in the global and domestic financial environment than Moody’s had anticipated.

Moody is expecting that eventual ease of monetary policy tightening in the US will help stabilize, if not improve, capital flows to emerging market countries such as India,  However, until inflation in advanced economies is firmly in check, emerging markets will remain vulnerable to bouts of heightened financial market volatility.

Moody’s said the year 2023 started on a seemingly optimistic note for the global economy following positive surprises on several fronts, including the lifting of COVID-related restrictions in China, unseasonably warm weather that has helped Europe cope with the energy crisis far better than had been expected, and improved financial conditions.

Still, Moody expects global growth to continue to slow in 2023, with increasing drag from cumulative monetary policy tightening on economic activity and employment in most major economies. “We forecast G-20 global economic growth will downshift to 2 percent in 2023 from 2.7 percent in 2022, and then to improve to 2.4 percent in 2024.”For China, Moody’s estimated GDP growth at 5 percent in 2023, up from 3 percent in 2022.

In summary, Moody’s update suggests that the global economic recovery is likely to face 

doldrums and will depend upon numerous factors, including inflation, vaccination pace, and monetary policy decisions.  While emerging market countries like India have shown resilience, they remain vulnerable to volatility until advanced economies can stabilize inflation.