India is feeling the impact of the ongoing war with lower economic forecasts as a fallout of the ongoing conflict. The situation relating to Covid 19 pandemic in India has seen significant improvement in the last month leading to lifting of restrictions across the country. We have seen glimpses of the pre-pandemic normal activities in the last few weeks. This something to cheer for and we hope the situation only gets better.

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Fitch Lowers Projection – Fitch Ratings has recently released its special report ‘Global Economic Outlook – March 2022’. The report mentioned that post-Covid-19 pandemic recovery is being hit by a potentially huge global supply shock that will reduce growth and push up inflation. The war in Ukraine and economic sanctions on Russia have put global energy supplies at risk. Fitch Ratings has cut its world GDP growth forecast for 2022 by 0.7pp to 3.5%. India’s growth forecast for the next fiscal to 8.5 per cent from 10.3 per cent (which was reported by Asia Law Portal), citing sharply high energy prices on account of the Russia-Ukraine war. With the Omicron wave subsiding quickly, containment measures have been scaled back, setting the stage for a pick-up in GDP growth momentum in the June quarter this year, the agency said. Observing that Indian GDP growth was very strong in the December quarter, the agency said the GDP is more than 6 per cent above its pre-pandemic level though it is still well below its implied pre-pandemic trend. “High-frequency data indicate that the Indian economy has ridden out the Omicron wave with little damage – in stark contrast with the two previous coronavirus waves in 2020 and 2021,” it said. Fitch now sees inflation strengthening further, peaking above 7 per cent in the December quarter of 2022, before gradually easing.

Moody’s Growth Reduction – Moody’s Investor Service recently slashed India’s growth estimate for the current year to 9.1 per cent, from 9.5 per cent earlier (which had been reported by Asia Law Portal), saying high fuel and fertilizer import bill could limit the government’s capital expenditure. In its report titled ‘Global Macro Outlook 2022-23 (March 2022 Update): Economic Growth will suffer as fallout from Russia’s invasion of Ukraine builds’, it said Russia’s invasion of Ukraine has significantly altered the global economic backdrop through three main channels — spike in commodities prices, risks to global economy from financial and business disruption and dent in sentiment due to heightened geopolitical risks. With regard to India, it said the country is particularly vulnerable to high oil prices, given that it is a large importer of crude oil. Because India is a surplus producer of grain, agricultural exports will benefit in the short-term from high prevailing prices. “High fuel and potentially fertilizer costs would weigh on government finances down the road, potentially limiting planned capital spending. “For all of these reasons, we have lowered our 2022 growth forecasts for India by 0.4 percentage point. We now expect the economy to grow by 9.1 pc this year,” Moody’s Investors Service said. It forecast growth for 2023 at 5.4 per cent. The year-end inflation for India has been projected at 6.6 per cent in 2022.

ASEAN and India – Association of South East Asian Nations (ASEAN) and India reaffirmed their commitment to bring their Strategic Partnership to a greater height at the 22nd ASEAN-India Joint Cooperation Committee Meeting held at the ASEAN Secretariat recently.
This year is an important milestone in the partnership, marking the 30th anniversary of ASEAN-India relations, and the designation of the year as ASEAN-India Friendship Year. The meeting noted several commemorative activities to mark the momentous occasion. The meeting took note of the overall progress in implementing the ASEAN-India Plan of Action (2021-2025). Both sides reiterated their commitment to effectively continue the implementation of the Plan of Action to ensure the depth and breadth of the engagement between ASEAN and India benefit the peoples of both sides.  Both sides have established an ASEAN-India Project Management Unit at the ASEAN Secretariat in Jakarta, as part of the efforts to strengthen effective utilisation, management and execution of the joint programmes/projects funded through ASEAN-India Fund and the ASEAN-India Green Fund. The meeting commended India’s active participation and contribution to supporting the ASEAN Centrality in the evolving regional architecture, particularly the ASEAN-led mechanisms. It underscored the importance of the implementation of the ASEAN-India Joint Statement on Cooperation on the ASEAN Outlook on the Indo-Pacific for Peace, Stability, and Prosperity in the Region, which was adopted by the leaders at the 18th ASEAN-India Summit in October last year.

Foreign Investment OutflowForeign investors have withdrawn a net Rs 1,14,855.97 crore from the Indian markets in 2022 so far amid heightened inflationary concerns and geopolitical tensions. Foreign portfolio investors (FPIs) have sold domestic equities worth Rs 48,261.65 crore thus far in March, taking the year to date count in 2022 to a colossal Rs 1,14,855.97 crore, as per depositories’ data. The exit of FPIs was mainly due to inflationary pressures and intensifying macroeconomic conditions worldwide following the Russia-Ukraine war, according to experts. This is the sixth consecutive month when overseas investors have pulled out their holdings on a net basis from the Indian equity market. FPIs fear that India would be affected more by commodity price increases, notably in crude oil since the country is a major importer.

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra, India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel in Delhi, India; views expressed are personal; he can be reached at; Twitter: @sourish247

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