2022 forecast changes by vintage (India's economy)

While we have revised down our growth expectations after the war, risks to forecasts tilt heavily to the downside

Surging commodity prices will have a large and direct impact on companies and consumers in India. Companies that set their 2022 targets before the Ukraine invasion should revisit their assumptions to account for heightened inflationary pressures and the resulting downside impact on spending and investment from their customers. However, firms should note that not all customer segments will be impacted to the same degree. SMEs for B2B companies and low-income consumers for B2C companies will experience more severe demand destruction compared to large companies and high-income consumers. Firms should carefully segment their customer base to assess their pricing and marketing efforts to maximize revenues.


India’s economy had fully recovered from the pandemic shock by the end of 2021 and was expected to grow at a moderate and stable rate in 2022. However, Russia’s invasion of Ukraine has sent commodity prices skyrocketing, of which crude and edible oil prices will directly impact India’s import bill and domestic inflation dynamics. The war has also triggered risks of a global growth slowdown, weakening growth prospects for several emerging-market economies.

Our View

Firms should expect costs to remain elevated through 2022. Before the war, we had already revised up our 2022 inflation forecast from 4.5% YOY to 5% YOY. Since the war began, we have further revised up our 2022 inflation forecast to 6.3% YOY with a significant upward risk. Higher commodity prices will put pressure on the cost of production, likely triggering producers to prioritize saving costs and margins over additional investments. Public sector investment—previously expected to be a driver for growth in 2022—will also take a hit as government revenues from fuel taxes fall short of targets. Finally, consumers will become increasingly price sensitive in their spending behavior, as high food and fuel costs occupy a higher share of their wallet. Aside from inflationary pressures, the war has also triggered downward expectations for global growth, further worsening the outlook for India’s economy.

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