FICCI survey pegs India’s FY23 GDP growth at 7.4%

With rising inflation and major geopolitical risk for Indian economy, most of the rating agencies and global brokerage have been downsizing India’s growth numbers. The latest estimate has come from industry body, FICCI, which has pegged Indian median GDP growth forecast for FY23 at 7.4%.

The Economic Outlook Survey pegs GDP growth at 6% on the lower side and at 7.8% on the higher side, with median estimates falling at 7.4%.

The Economic Outlook Survey by FICCI has also done a granular projection of the growth estimates. According to the FICCI survey, median growth forecast has been pegged at 3.3% for agriculture and allied activities while it has been pegged at 5.9% for industrial sector.

The predominant services sector has pegged the growth rate at 8.5%. However, that is still going to be a substantial contribution considering that services constitute over 60% of GDP.

However, FICCI has added a caveat to these estimates in that the downside risks remain significant. According to FICCI, events like the ongoing Russia-Ukraine conflict, the gold peg by the Russian central bank, the rising cases of COVID-19 pandemic in China could all be medium term dampeners to growth and could negatively impact economic recovery. With WPI inflation at over 12%, the input cost risk also happens to be very significant.

On the inflation front, FICCI has projected retail inflation at 6% in Q4 2021-22 and 5.5% in Q1 2022-23. While FICCI broadly agrees with the RBI’s median inflation forecast of 5.3% for FY23, it does see inflation in a much wider range of 5% on the downside and 5.7% on the upside.
 

However, FICCI also projects the oil prices to remain relatively restrained in the coming year which would likely cool the inflation impact; both direct and indirect.

On the subject of commodity prices, FICCI has pointed out that the ongoing Russia-Ukraine conflict, if prolonged, could seriously hit supplies of major raw materials like crude oil, natural gas, food, fertilizers and metals.

This commodity prices and input cost impact would continue to be a major issue in FY23. In the Indian context, FICCI has warned that rising commodity prices coupled with rupee weakness could lead to imported inflation.

On RBI monetary policy cues, FICCI survey points that the RBI policy on 08th April may refrain from rate hikes and may even continue with the current accommodative stance of the policy.

However, FICCI has warned that should inflation continue to plague the Indian economy, then the RBI may he forced to back-end rate hikes by 50-75 basis points in 2022. FICCI survey also calls for fiscal support in the form of lower excise levies to rein in inflation.