Indian government cuts economic growth outlook sharply ahead of Union Budget

The Indian government projects a slowdown in economic growth in the current fiscal year that ends in March as the pent-up demand for products levels off as 2023 approaches after pandemic-related distortions have subsided.

That adds to a long list of large financial institutions and private economists who have sharply cut their economic growth forecasts for Asia's third-largest economy.

In its first estimate for the current fiscal year, the Ministry of Statistics predicted that the gross domestic product (GDP) would likely rise by 7%, down sharply from 8.7% the year before.

That was lower than the government's previous prediction of 8% to 8.5% but higher than the Reserve Bank of India's projection of 6.8%.

The estimates are the foundation for the government's growth and financial projections for the upcoming budget, due on February 1.

On February 1, 2023, the finance minister will deliver the 2023 Union Budget, marking Ms Sitharaman's fifth consecutive budget and Prime Minister Narendra Modi's eleventh consecutive one.

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The budget will also be the last complete one before Prime Minister Narendra Modi faces a run for a rare third term in elections scheduled for the summer of 2024.

In a note to clients, Pranjul Bhandari, an economist at HSBC Securities and Capital Markets, predicted that, among other things, the fiscal year beginning on April 1 will see India's exports suffer, reducing the country's potential for development.

But an International Monetary Fund (IMF) official said on Friday that India continues to be a relative "bright spot" in the global economy, and it needs to expand its current strength in services exports to include exports of manufacturing, which provide many jobs.

Still, despite the downgrades to India's economic outlook, the Organisation for Economic Co-operation and Development said India is anticipated to continue having the second-fastest growing GDP among the G20 nations, behind only Saudi Arabia (OECD).

"Buoyant albeit mixed domestic consumption should help to stave off some of the pain arising from weak exports during this period," Aditi Nayar, an economist at ICRA, told Reuters.

(With inputs from agencies)

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