In India, we expect growth to slow down to 6% in 2023-24: Chief Economist, S&P Global Ratings

If we are going to have elevated interest rates in the US, this is clearly a headwind for the Asian economies. We are not projecting any economic growth for the US or Eurozone next year. We do expect growth in the whole of the Asia Pacific region to slow in 2023. But to a smaller degree than the US and Europe. In India, we expect growth to slow down to 6 per cent in 2023-24 from the current projection of 7 per cent in 2022-23. Slow down will be limited in India.

This is something that Governments need to watch out for. We are seeing a sudden worsening of that current account position in India as well.  In India, there was a surplus in 2021-22. This fiscal year, there would be a deficit of 2-3 per cent of GDP. You don’t want that deficit to become too large. Policymakers need to watch out. If I were to be an Indian policymaker, I wouldn’t want the deficit to be larger than 3 per cent as it looks extremely bad. Economists, financial markets, and traders get nervous when they see that. 

I would say foreign exchange reserves management. RBI has used some reserves for its interventions, but the quantum used to fight the pressure has been quite limited. It is a few dozen billions of dollars. It is not nothing but certainly much lesser than the levels used in previous bouts of pressure. This is actually a good thing because trying to fight off pressure through forex reserves only has limited results. It is very costly and it is much better to absorb pressure by weakening currencies. That is a big plus we have seen.