Moody's slashes India's economic growth forecast for 2022

However, inflation remains a challenge for India, with the RBI having to balance growth and inflation while also containing the impact of imported inflation from the year-to-date depreciation of the Indian rupee against the US dollar of around 7 percent, the agency said.

The agency also cut the 2022 real gross domestic product (GDP) growth forecast for G-20 countries to 2.5 percent from 3.1 percent forecast in May. Moody's also cut the GDP growth forecast for the G-20 nations to 2.1 percent from 2.9 percent for the year 2023.

"Global monetary and financial conditions will remain fairly restrictive through 2023," said Madhavi Bokil, Senior Vice President at Moody's.

"Central banks will require decisive proof that high inflation no longer poses a threat to their policy objectives before letting up on their tight monetary stance," Bokil said. He added that the challenging global economic environment of today would be resolved with a sharp and disinflationary slowdown in economic growth.

According to Moody's, the advanced economies of the G-20 will increase by 2.1 percent in 2022 and 1.1 percent in 2023. For the G-20 developing market countries, Moody's forecasts growth of 3.3 percent in 2022 and 3.8 percent in 2023.

"Our revised projections reflect the hit to households' purchasing power from unrelenting inflation and rapid tightening of global financial conditions because of the hawkish policy pivot of central banks, particularly that of the Fed.  COVID-19 restrictions in China and cuts in Russian gas supply to Europe are weighing on the economic outlooks for advanced and emerging economies," said Moody’s

Global trade in durable goods and commodity prices are expected to decrease, according to Moody's.

The demand for commodities is starting to decline. It said that global vehicle manufacturing is increasing, and supply-chain issues are getting better.