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India's GDP is expected to grow at 7.4% in 2022-23, but the recovery may be weighed by rising inflation, weak private consumption, according to an influential trade and industry group on Sunday.
FICCI Economic Outlook Survey estimates a minimum and maximum growth of 6.0 percent and 7.8 percent, respectively.
Growth for agriculture and allied activities has been pegged at 3.3% and the industry and services sectors will grow at 5.9% and 8.5%, respectively, the report said.
However, it said downside risks to economic growth remain escalated. “While the threat from the pandemic remains on fore, the continuation of Russia-Ukraine conflict is posing a significant challenge to global recovery."
The outlook was based on survey conducted during March 2022 and drew responses from leading economists representing industry, banking and financial services sector.
The participants tagged inflation as the most significant risk for India. Surging crude oil prices are likely to adversely impact India's macros. Increase in oil-prices coupled with the sharp fall in Rupee value is inflating India's import bill adding to the stress on current account, the survey showed.
The outlook projected CPI based inflation at 6.0 percent in Q4 2021-22 and 5.5 percent in Q1 2022-23.
The current conflict is expected to further aggravate the price rise through imported commodities. The estimate for average wholesale price index-based inflation in Q4 of 2021-22 has been put at 12.6 percent.
Economists who were surveyed said that weak private consumption has dragged recovery, with consumer sentiments being tepid for most of 2021-22. With escalating inflation, the purchasing power is being further restrained, especially for the low & lower-middle income households, the outlook said.
On the monetary policy front, the survey said the country’s central bank is expected to continue to support the ongoing economic recovery by keeping policy repo rate unchanged in its April announcement. RBI will look at reversing its stance only in the second half of 2022 "and one can expect a rate hike between 50-75 bps by end of this fiscal year".
(Writing by Brinda Darasha; editing by Daniel Luiz)
