India forecasts slower GDP growth on global headwinds

India's economic growth will slow to 7.0% this financial year (FY 2022-23), according to official estimates released Friday, as weaker global demand and high inflation weigh on the Asia's second largest economy.

The National Statistics Office forecast for the year ending March 31 still ranks India's economic outlook above every other major country but is down from the 8.7% growth recorded in 2021-22.

India bounced back strongly from the Covid-19 pandemic but is now grappling with the same headwinds buffeting the global economy.

Rising petrol costs following Russia's Feb 24 invasion of Ukraine have had a ripple effect on prices for the country's 1.4 billion people.

The Reserve Bank of India (RBI) has hiked rates by 2.25 percentage points between May and December in an aggressive response to rising consumer inflation, which hit a high of 7.79% in April before moderating.

Higher commodity costs and a falling rupee have left India struggling with a deteriorating trade balance and its current account deficit hit a record high of $36.4 billion in the September 2022 quarter.

The Indian rupee hit record lows in 2022, plunging more than 11% against the US dollar as the greenback rallied on risk-averse market sentiment. But India's currency has proven more resilient than its Asian peers, aided by regular central bank intervention.

The International Monetary Fund (IMF) forecasts 6.1% growth for India this year, down from 6.8% in 2022.

But the figure is still significantly higher than every other major world economy, with IMF deputy managing director Antoinette Sayeh attributing India's resilience to structural reforms and its hawkish approach to fighting inflation.

"India is a relative bright spot in the world economy today, growing at rates significantly above its peer average," she told an event in New Delhi on Friday.

India's benchmark Sensex closed 0.75% lower in Mumbai ahead of the GDP growth data release.