GDP forecast: India Ratings has reduced India’s economic growth forecast for the financial year 2022-23 from 7.6 percent to 7.2 percent. The reason for this is mainly attributed to the impact of domestic consumption due to the increase in the prices of crude oil and commodities amid the Russia-Ukraine conflict.
Oil prices will increase such pressure
According to the rating agency, if oil prices remain at current levels for three months, then GDP growth can be 7.2 percent and if oil prices remain at these levels for six months, then the growth will come down to 7 percent. In both cases, half of the burden is expected to fall on the domestic economy.
Consumer sentiment will be hit hard due to rise in commodity prices and consumer inflation due to Russia-Ukraine conflict. India Ratings expects private consumption to decline to 8-8.1 per cent in FY23 from 9.4 per cent earlier.
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Inflation may increase to 6.2 percent
The agency said, if oil prices remain at this level for three months, then average retail inflation in FY23 is expected to be 5.8 percent and if oil prices remain at this level for six months, it may be 6.2 percent, whereas Earlier it was estimated to be 4.8 percent. Both petrol and diesel have become costlier by Rs 5.60 till Wednesday due to the change in prices eight times in the last nine days.
The rating agency estimates that the central bank’s Monetary Policy Committee (MPC) may maintain a soft stance in FY23 to support the economic recovery.
What will be the current account deficit
The rating agency said in its note, India’s current account deficit is expected to range between 2.8 per cent and 3.2 per cent, as against the earlier estimate of 2.3 per cent, due to higher import bills of gems and jewellery, edible oil and fertilizers. . The agency said that if crude oil prices rose by $5 a dollar, it would increase the current account deficit by $6.6 billion.
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