Jahangir Aziz, the head of emerging market economics at JP Morgan, predicts a slowdown in India’s growth during the second half of the year. This can be attributed to both global economic deceleration and domestic factors such as high inflation and rising borrowing costs.
Aziz expects India’s growth to slow down to approximately 4-4.5% in the second half, compared to 6.5-7% in the first half. He emphasizes that this slowdown is necessary for maintaining macroeconomic and financial stability.
This forecast aligns with recent assessments by other institutions. The World Bank projects India’s growth to slow to 6.3% in FY2023-24, down from 8.7% in FY2022-23. Similarly, the Reserve Bank of India expects growth to moderate in the second half of the year.
Multiple factors contribute to the slowdown in India’s growth, including:
- Global economic deceleration: The worldwide economy is projected to grow at a slower pace in 2023 due to factors like the war in Ukraine and rising inflation. This is expected to negatively impact India’s exports, which have been a significant growth driver in recent years.
- High inflation: Inflation in India has been increasing, reaching a 17-month high of 7.79% in May. This puts pressure on household incomes and is likely to dampen consumer spending.
- Rising borrowing costs: The Reserve Bank of India has raised interest rates multiple times in recent months to control inflation. Consequently, it may become more expensive for businesses to borrow, potentially affecting investment.
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