The report bases its optimism on rising corporate revenues and profits and rising bank credit along with adequate liquidity in the system.
The report bases its optimism on rising corporate revenues and profits and rising bank credit along with adequate liquidity in the system.
SBI Research has projected the Indian economy to grow at 7.5% in 2022-23, an increase of 20 basis points from its earlier estimate.
According to official data, the economy grew 8.7% in FY12, with a net increase of Rs 11.8 lakh crore in the year to Rs 147 lakh crore, the report said, though adding it to the pre-pandemic year of FY10. was only 1.5% higher in comparison.
“Given the high inflation and subsequent rate hikes, we believe real GDP to grow by Rs 11.1 lakh crore in FY13. This is still at 7.5% of real GDP for FY13. That translates into product growth, which is 20 basis points higher than our previous forecast,” SBI Chief Economist Soumyakanti Ghosh said in a note on Thursday.
Nominal GDP grew by ₹38.6 lakh crore to ₹237 lakh crore, or 19.5% annually. He said even in FY23, with inflation remaining high in the first half, nominal GDP would grow by 16.1% to Rs 275 lakh crore.
The report bases its optimism on rising corporate revenues and profits and rising bank credit along with adequate liquidity in the system.
On rising corporate growth, the report said that in FY12, around 2,000 listed companies registered a 29% top line growth and a 52% increase in net profit over the previous year.
The construction sectors, including cement, steel, etc., registered impressive growth in both revenue and net income, with revenues increasing by 45% and 53%, respectively.
Interestingly, the order book position remains strong, with manufacturing major L&T reporting a 9% growth in the order book position at ₹3.6 lakh crore till March, from ₹1.9 lakh crore in FY22 Supports 10% growth in order inflow of ₹1.7 lakh crore. in the financial year 2011.
Similarly, sector-wise data for April indicates that credit offtake has taken place across almost all sectors, with personal loans registering a demand growth of 14.7% in April and nearly 90% of incremental credit in the month. Contribution has been made, which is mainly driven by Housing, Auto and. Other personal loans as customers are ramping up their purchases, anticipating a rise in interest rates.
On the liquidity front, the report expects the central bank to support growth only by gradually increasing repo rates, but mostly it will be reflected in the repo hike of 50 basis points in June and August and the CRR (cash reserve ratio) of 25 basis points. will proceed with the increase. Upcoming June policy.
Core systemwide liquidity declined to ₹6.8 lakh crore from ₹8.3 lakh crore at the start of the year, while net LAF (liquidity adjustment facility) absorption declined to ₹3.3 lakh crore from ₹7.5 lakh crore.
The RBI is likely to raise the repo rate cumulatively by 125-150 basis points at the pandemic level of 4%.
The central bank may cumulatively increase the CRR by 50 basis points after the 50 basis points increase in the previous monetary policy, leading to absorption of ₹1.74 lakh crore from the market on a sustainable basis (₹87,000 crore absorbed earlier).
Higher government borrowings have ruled out the possibility of OMO sales, thus the CRR hike appears as a potentially non-disruptive option to absorb durable liquidity. In addition, it opens up space for the central bank to do liquidity management in the future through OMO purchases.
With this, the monetary authority can give back to the market at least three-fourth of the ₹1.74 lakh crore absorbed through CRR hike or ₹1.30 lakh crore in some form or the other to address the period supply. This will reduce market borrowings to about ₹13 lakh crore.
Given higher crude oil prices, trading above $120 a barrel, the report sees inflation average 6.5-6.7% in FY23.