Rating agency Icra on Tuesday projected the economy to grow 12-13 per cent in the first quarter of the current fiscal, citing the second-highest business activity index in 13 months in April. However, ICRA has retained its annual GDP estimate for the current fiscal at 7.2 per cent, citing concerns over inflation and consequent RBI’s strictures.
Aditi Nair, Chief Economist, ICRA, told PTI, “Our 115.7 business activity monitoring for April indicates that activity is comparable to a year ago (period) and pre-COVID levels despite global constraints.” was about 16 percent higher. This high growth may persist into May, especially on an annual basis, which should translate into double-digit GDP expansion at 12-13 per cent in the first quarter. However, this may not be sustained and the annual increase in volume and activity may be moderate, she said.
According to him, higher input costs can reduce GVA growth to single digits. “Therefore, we maintain our GDP growth forecast for FY13 at 7.2 per cent”. Citing rising inflation concerns, he said the consumer price index is expected to average 6.3-6.5 per cent in the current fiscal.
The biggest upside risks to inflation and growth come from fuel prices and the effects of the war in Ukraine. He said that if the war does not subside in the near term, the impact will be much greater than anticipated. This is also the primary reason for maintaining the low GDP growth forecast for the full year at 7.2 per cent and the lower base effect higher.
On the interest rate front, Nair said the central bank is expected to hike the policy review by 25 basis points for June and August and the September action will depend on the direction of the war and its impact on commodity prices. Earlier in the day, the agency said in a report that its business activity monitoring stood at 115.7 in April, the second highest in 13 months and a low base exaggerated growth of 16.1 per cent.
The index stood at 123.7 in March as compared to 107.8 in February. The monitor includes high-frequency indicators related to 14 industrial and service sectors and is an index of high-frequency economic indicators that measure economic activity each month.
The monitor is constructed using 14 monthly high frequency indicators which include auto production, Coal India production, power generation, non-oil merchandise exports, rail freight traffic, port cargo traffic and vehicle registration.
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