With strong services demand, and the recent correction in key commodity prices likely to ease the pressure on margins of the India Inc., we expect an upside emerging to our estimate of the YoY GDP growth of 6.5-7.0% for Q2 FY23.Īdditionally, we project GDP growth in H2 FY23 at 5.0-5.5%, inching close to the potential rate of growth, notwithstanding the bleak outlook for exports. We believe gross domestic product (GDP) growth will be lower than the committee’s projections for Q1 FY23, at 12.5-13%, considering the impact of the elevated commodity prices on demand for goods and producers’ margins, and the adverse effect of the heatwave on wheat yields and, therefore, agri GVA growth. It had pegged the quarterly growth rates at 16.2% for Q1 FY23 on the low base of Covid 2.0, 6.2% for Q2 FY23, and a rather tepid 4.1% for Q3 F23 and 4.0% for Q4 FY23. The MPC had retained its growth forecast for real GDP for FY23 at 7.2%, in line with our projection. Therefore, we expect the MPC to moderate the projections for FY23 CPI inflation from 6.7% to 6.5%.
Overall, we project the CPI inflation readings to dip below 6% in a majority of the months from November to March 2023. However, the average reading for the quarter, of 7.3%, did end up mildly trailing the MPC’s forecast of 7.5%. Subsequent data revealed that CPI inflation readings moderated to 7.0% each in May-June, from the alarming 7.8% in April, while remaining well above the upper tolerance level of 6.0%. In June, the MPC had sharply raised its CPI inflation forecast for FY23 to 6.7% with risks broadly balanced from the 5.7% projected in April. Notwithstanding an aggressive US Federal Reserve, we foresee modest rate hikes of 60 bps from the MPC spread over two policy reviews, followed by a pause to assess the robustness of growth. With commodity prices retreating amid fears of a global recession, there is a glimmer of hope that India’s consumer price index (CPI) inflation will fall within the MPC’s tolerance band of 2-6% by the middle of September quarter. The June monetary policy review had seen a stepped-up increase of 50 basis points (bps) in repo rate, following the Monetary Policy Committee’s (MPC’s) off-cycle hike of 40 bps in May.
0 kommentar(er)
