New Delhi: India Ratings and Research (Ind-Ra) has cut India’s GDP growth forecast for the 2022-23 financial year to 7-7.2 per cent from its earlier estimate of 7.6 per cent announced in January.
The rating agency said the 7.6 per cent growth projection announced in January 2022, is unlikely to hold due to the global geo-political situation arising out of the Russia-Ukraine conflict.
In the new report, Ind-Ra has created two scenarios with respect to the FY23 economic outlook based on certain assumptions.
In Scenario 1, the crude oil price is assumed to be elevated for three months, and in Scenario 2, the assumption is for six months, both with a half cost pass-through into the domestic economy.
Ind-Ra expects GDP to grow 7.2 per cent YoY in Scenario 1 and 7.0 per cent yoy in Scenario 2 in FY23, compared to its earlier forecast of 7.6 per cent.
However, the size of the Indian economy in FY23 will still be 10.6 per cent and 10.8 per cent lower than the FY23 GDP trend value in Scenario 1 and Scenario 2, respectively.
Although the January 2022 round of Reserve Bank of India’s (RBI) Consumer Confidence Survey shows that the Current Situation Index increased marginally on the back of better sentiments with respect to the general economic situation, it continues to be in the pessimistic zone, it said.
The Expectations Index, which captures one year ahead outlook, moderated due to the surge in COVID-19 infection cases in January 2022. Household sentiments on non-essential/ discretionary spending continue to be subdued.
As the consumer sentiment is likely to witness a further dent due to the Russia-Ukraine conflict leading to rising commodity prices/consumer inflation, Ind-Ra expects PFCE to grow at 8.1 per cent and 8.0 per cent in Scenario 1 and 2, respectively, in FY23, as against its earlier projection of 9.4 per cent.