FICCI lowers India's FY23 growth estimate to 7% due to global crisis, inflation

An economic outlook survey by the Federation of Indian Chambers of Commerce and Industry has cut the gross domestic product growth estimate for 2022-23 at 7 percent from 7.4 percent earlier because of persistent geopolitical uncertainty.

“There was a unanimous view among the participants that although the Indian economy is expected to face a slowdown in the near-to-medium term, it will still grow consistently to emerge as the fastest growing economy in the world,” the industry body said in a statement on July 21.

The country is not sheltered from global volatilities, evident from the escalating inflation and increasing uncertainties in the financial markets, which is exerting a visible impact on India’s growth outlook, it said.

The survey forecasts for agriculture and allied activities to grow 3 percent in 2022-23, while industry and services sector are anticipated to grow by 6.2 percent and 7.8 percent.

It projects the retail inflation at 6.7 percent for 2022-23 and expects the Reserve Bank of India’s policy repo rate to be raised to 5.65 percent by the end of fiscal year 2022-23 from 4.9 percent.

“There was a unanimous view that the Reserve Bank of India will continue to take a hawkish stance in its forthcoming monetary policy meetings for the rest of the year, and thereafter it may resort to a neutral stance,” FICCI said.

With upside risks to inflation remaining on fore, the government should work out a comprehensive roadmap which may require action at multiple levels.

FICCI suggests measures such as nudging states to undertake tax cuts on petrol and diesel as well as inclusion of petroleum and natural gas under the goods and services tax to bring down inflation.

The survey participants said that it will be critical that both the central bank and the government continue to work in tandem as balance between the fiscal and monetary policies will remain crucial.

The survey forecasts 2022-23 exports at $460 billion and imports at $727.5 billion.