- S&P Global Ratings expects that the economy is expected to grow by 10% in the 2022 fiscal year starting on April 1.
- S&P expects an increase in the manufacturing sector.
- The global economic slowdown has triggered a sharp rise in inflation across economies.
In its latest report, Standard & Poor’s (S&P) anticipates that India’s economy will rebound 10% in the next two years. This comes as a major relief for the many Indian professionals who had to deal with cutbacks and job cuts at the lowest level in their lives. The current recession has affected every sector of the Indian economy.
The Indian economy was already facing challenges due to slowing growth.
In the 2021 fiscal year, ending at the end of March, the Indian economy is expected to shrink by 7.7%.
However, S&P Global Ratings expects that the economy is expected to grow by 10% in the 2022 fiscal year starting on April 1.
The government has taken steps to boost the economy through effective fiscal policy and various reforms. The recovery will take time. However, it is optimistic.
“The Indian economy is on track to recover in fiscal 2022,” the report said. “Consistently good agriculture performance, a flattening of the Covid-19 infection curve, and a pickup in government spending are all supporting the economy.”
S&P expects an increase in the manufacturing sector. The sectors that are expected to be beneficiaries are electronics, automobiles, chemical products, petroleum, and transportation equipment.
The services sectors, like finance, information technology, and commerce, are also expected to see strong growth. This means that the upward trend will continue, but it will be moderate as compared to other economies.
“We view Covid vaccinations as critical to India’s recovery over the next few years, and as key to normalizing demand,” the S&P report said. “The emergence of yet more contagious Covid-19 variants with the potential to evade vaccine-derived immunity present a major risk to this recovery.”
On the other hand, the global economic slowdown has triggered a sharp rise in inflation across economies. With a weaker currency, inflation has surged past official expectations. Although the inflation outlook is uncertain, S&P’s inflation estimates are suggesting a downturn in the second half of this year, followed by an increase in the first half of 2021.
The recent rise in food and oil prices has also led to higher inflation in emerging markets like India. Other than the inflation scenario, the weakening of the currency has led to contractions in financial-market market indices, like bonds, stocks, and commodities.
Apart from the inflation outlook, S&P also forecasts that industrial production will fall by around three percent this year. However, industrial output is expected to pick up from the end of this financial year.
The decline is interpreted as a result of increasing uncertainty caused by the global economic crisis. Uncertainty is seen as one of the main drivers of market volatility.
In addition to the market sentiment, S&P forecasts the level of global economic activity to decline moderately this year. It is seen that the global economy will avoid a technical reverse, which could result in a slowdown in the euro area.
It is also estimated that the decline will be driven by a softening in global business and economic spending. Consumer spending is seen to increase slightly this year, as rising living standards in emerging markets boost consumer confidence.
European governments have been implementing cautious economic policies, which have limited the scope of policymakers to implement significant policy changes. In view of the increased risk of default by European governments, there is a continued risk of heightened inflationary pressures in the euro area.
However, it is seen that European inflation will pick up from this over the course of this year. The consensus across the board of S&P analysts is that the combination of an attractive monetary policy and gradual economic growth will be good for the euro area as a whole.
Inflation is expected to remain low over the course of this year, driven by continued economic stimulus from the European Central Bank. However, wage inflation is expected to pick up from the low level of late 2021.
Consumer price index (CPI) inflation is expected to remain steady over the course of the year, with little change due to rising prices in the domestic market.
Central bank interventions have been effective in stabilizing the euro exchange rate and preventing currency depreciation.
In view of this, the European Central Bank will probably look to reduce its interest rates later this year.
In line with this, the forecasts of European economic indicators are indicating a slow but steady pace of recovery from the recent global economic crisis. The Eurogroup of finance ministers has indicated that it will consider additional measures to stimulate the euro market once it finishes its current stimulus program.
At the time, there is some optimism among economic researchers regarding the outlook of the US economy. US officials have stated that they will continue to take a wait-and-watch approach towards the state of the national economy.