Domestic rating agency Crisil on Friday lowered its real GDP growth forecast for India to 7.3 per cent in FY23 from 7.8 per cent estimated earlier. This attributed the downward revision to higher oil prices, sluggish export demand and high inflation.
This is in line with the RBI’s estimate of 7.2 real GDP growth for the current fiscal. Crisil said there are many negative factors such as higher commodity prices, higher freight prices, lower global growth projections, pressure on exports and weak demand side, the biggest of private consumption.
The only bright spots are spurt in contact-intensive services and forecast of normal and well-delivered monsoon, it said, undermining its growth outlook. Inflation, which has been pegged at an average of 6.8 per cent in FY12, as against 5.5 per cent in FY12, weighs on purchasing power and the revival of consumption, the largest component of GDP, the agency said. .
Factors contributing to the broad-based rise in inflation will include the impact of this year’s heat on domestic food production, coupled with higher international commodity prices and input costs. The agency also said that higher commodity prices, slower global growth and supply chain disruptions will impact the current account and projected the current account deficit to increase from 3 per cent of GDP in FY12 to 1.2 per cent in FY12. Will go
This will put pressure on the currency, and the rupee is projected by the agency to be 78 to the US dollar in March 2023, compared to 76.2 in March 2022. The rupee-dollar exchange rate will remain volatile with a depreciation bias. The close on the back of a widening trade deficit, foreign portfolio investment (FPI) outflows and a strengthening US dollar index (due to a rate hike by the US Federal Reserve, or Fed and safe-haven demand for the dollar amid geopolitical risks) In period, it said.
The agency expects the global crude oil average in FY13 to be in the range of $105-110 a barrel, up 35 percent from the previous fiscal year and the highest price since 2013. Higher commodity prices have a domino effect on India. As the terms of trade worsen with rising import bill, imported inflation rises, it said.
With inflation picking up, the RBI expects a further 75 basis points increase during the financial year on top of the increase of 90 basis points already announced, it said. However, rising interest rates will not impact growth prospects to a large extent as real interest rates are likely to remain below pre-pandemic levels and monetary policy action is transmitted with a lag, it said.
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