Moody’s Investors Service recently revised its estimate for India’s economic growth in 2023 from 4.8 per cent to 5.5 per cent. This is due to the significant increase in capital expenditure in the recent Union Budget and the country’s resilient economic momentum. The government had allocated Rs 10 lakh crore for capex, which is 3.3 percent of GDP, and if implemented effectively, this could bring India’s real GDP growth close to 7 per cent in FY24, according to the RBI Bulletin.


However, India’s GDP growth rate in the December 2022 quarter decreased to 4.4 per cent from 6.3 per cent in the September 2022 quarter, according to government data. Moody’s also predicts that the US Federal Open Market Committee (FOMC) will raise interest rates by 50 to 75 basis points over the next two to three meetings, potentially taking the terminal rate to as high as 5.25 per cent to 5.50 per cent.


Moody’s stated that the economic momentum of several major emerging market countries such as India, Brazil, Mexico, and Turkey has been more robust than anticipated despite the tightening of the global and domestic financial environment last year. The rating’s agency also predicted that a reduction in monetary policy tightening in the US would stabilise or even enhance capital flows to emerging markets.


Nevertheless, emerging markets are susceptible to increased financial market volatility until inflation in developed economies is under control, according to Moody’s.

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