Indian economy back on track amid war: Moody's

New Delhi: Global financial services provider firm Moody's Analytics said India's economy is back on track after the pandemic and it doesn't expect the military conflict (in Ukraine) to derail the recovery. Several months into the conflict, fears over the impact have moderated.

"Following a robust rebound of over nine per cent in the year ending March 2022 (fiscal 2021), we expect real GDP to grow 8.2 per cent in fiscal 2022, the fastest expansion among G20 countries globally and partly reflecting ongoing base effects from pandemic-led disruptions," it said in a report.

The buoyant economy creates favourable operating conditions for the country's banks, besides their loan performance and profitability are improving, albeit from a low base. Capital and liquidity levels are also stable.

The global economic fallout from the Russia-Ukraine military conflict will push up inflation and interest rates in India, and create supply constraints, it said. India, as an agricultural economy, is a net food exporter but depends on significant agricultural imports such as palm oil.

"Higher food prices will therefore directly affect inflation, while soaring fuel prices will have an even larger adverse impact. India's Consumer Price Index (CPI) was 6.1 per cent before the conflict and had risen to 7 per cent in March."

Indian banks, however, are in better shape now than before the pandemic. Loan quality had deteriorated over the prior decade as a large proportion of the banks' corporate lending books turned sour.