New Delhi: S&P Global Ratings stated on Monday that India’s economic growth is expected to be 7.3% in the current fiscal year, with downside risks, and that inflation is likely to remain above the RBI’s upper tolerance barrier of 6% through the end of 2022.

S&P stated in its Economic Outlook for Asia Pacific that the recovery of domestic demand following the coronavirus epidemic will sustain India’s GDP in the upcoming year.

“We have retained our India growth outlook at 7.3 per cent for the fiscal year 2022-2023 and 6.5 per cent for the next fiscal year, although we see the risks tilted to the downside,” it said.

Due to increasing inflation and rising policy interest rates, some organisations have lowered their predictions for India’s GDP growth. Fitch Ratings reduced the growth prediction for the current fiscal year from 7.8 to 7 percent earlier this month. India Ratings & Research also lowered its forecasts, going from 7% to 6.9%.

The prediction was reduced by the Asian Development Bank from 7.5% to 7%.

According to the Reserve Bank of India (RBI), the Indian economy will expand by 7.2% during the current fiscal year (April-March). Growth in the previous year (2021–2022) was 8.7%.

The Indian economy grew 13.5% from April to June, which was larger than the 4.10% growth recorded from January to March.

S&P Global Ratings estimated that the average inflation rate for the current fiscal year was 6.8% and predicted that it will drop to 5% for the following fiscal year starting in April 2023.

“India headline Consumer Price Inflation (CPI) is likely to remain outside the Reserve Bank of India’s upper tolerance limit of 6 per cent until the end of 2022. That’s amid substantial weather-induced wheat and rice price increases as well as sticky core inflation. And food inflation may rise again,” it said.

For the eighth consecutive month, retail or consumer price inflation has above the RBI’s upper tolerance threshold of 6% and stood at 7% in August. For the 17th consecutive month, wholesale price inflation was double digits; it was 12.41% in August.

S&P Global Ratings predicted that policy interest rates in India will reach 5.90% by the end of this fiscal year as a result of rising core inflation.

The central bank has already increased benchmark interest rates by 1.40 percentage points to 5.40 percent in an effort to control persistently high inflation. The RBI is anticipated to raise rates by a further 50 basis points to a three-year high of 5.90% in its monetary policy review on September 30.