S&P Global Ratings lowers India's growth forecast to 7.3 per cent, RBI mulls rate hike

Tribune News Service

Sandeep Dikshit

New Delhi, May 18

International credit rating agency S&P Global Ratings on Wednesday cut India’s growth forecast for the current fiscal to 7.3 per cent from 7.8 per cent earlier on rising inflation and longer-than-expected Ukraine conflict even as RBI Governor Shaktikanta Das hinted at another rate hike.

S&P’s current projection of 7.3 per cent still remains above the RBI’s recently revised forecast of 7.2 per cent. The World Bank and IMF, however, still have higher growth projections of 8 and 8.2 per cent, respectively.

Das said there might be “much stronger action” in terms of raising interest rates at the next meeting on June 8. However, minutes of the RBI’s mid-cycle Monetary Policy Committee (MPC) revealed its members advocated “a measured approach” since the recent data suggested that India’s macro-fundamentals, barring imported food and fuel inflation, were still intact and in sync with recovery. However, MPC member Jayant Verma advocated a whopping 100 basis point increase in interest rates over time and proposed 50 basis points hike in the repo rate at the May meeting.

This means that the RBI will continue with liquidity withdrawal in a phased manner over a multi-year period. The RBI is buoyed by the forecast of a normal monsoon that brightens the prospects for kharif production.

New projections

7.3% GDP growth on rising inflation, Russia-Ukraine war

6.9% Retail inflation in the current fiscal

8% growth forecast by World Bank from 8.7% predicted earlier

8.2% projection by IMF from 9% earlier

Re skids to record low of 77.61 vs USD

• The rupee declined by 17 paise to close at its lifetime low of 77.61 vs $
• A stronger greenback and surge in crude oil prices also weighed
• It opened lower at 77.57, later hit 77.61 as dollar rebounded

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