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Business News/ Economy / FICCI downgrades India's GDP growth forecast for 2022-23
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FICCI downgrades India's GDP growth forecast for 2022-23

FICCI which had estimated India's growth at 7.4% for 2022-23 in April has now downgraded the the annual GDP growth forecast to 7.0%

India's annual GDP growth forecast for the financial year 2022-23 projected at 7% by FICCI ( iStock)Premium
India's annual GDP growth forecast for the financial year 2022-23 projected at 7% by FICCI ( iStock)

India's annual Gross Domestic Product (GDP) growth forecast for the financial year 2022-23 has been downgraded by the Federation of Indian Chambers of Commerce & Industry (FICCI) at 7.0% with a minimum and maximum growth estimate of 6.5% and 7.3% respectively.

The industry body's median growth forecast for agriculture and allied activities has been put at 3.0%. However, the industry and services sectors are anticipated to grow by 6.2% and 7.8% respectively.

In April, FICCI had estimated India's growth at 7.4% for 2022-23. However, in its latest round of Economic Outlook Survey (July 2022), it revised the growth projection on account of geopolitical uncertainty and its repercussions for the Indian economy.

The present round of surveys that drew responses from leading economists representing the industry, banking, and financial services sector, was conducted in the month of June 2022, the industry body said in a statement.

Stating that the Indian economy is not immune to global volatility, as is evident from the deepening inflationary pressures and increasing uncertainty in financial markets, FICCI in its statement said that the participants pointed out that these factors are exerting pressure on India's economic prospects and are likely to delay the recovery.

The industry body listed rising commodity prices, supply-side disruptions, and bleak global growth prospects with the conflict prolonging in Europe as major risk factors to India's economic recovery.

It further mentioned that the slowdown in the Chinese economy and increased input costs, that are impairing discretionary spending, as these get passed on to the final consumer through higher selling prices, are also expected to have an impact on India's growth.

FICCI estimated India's retail inflation rate at 6.7% for 2022-23, with a minimum and maximum range of 5.4% and 7.0% respectively, which is in line with RBI's projections. It further expected the inflation levels to slow down starting September 2022 and fall back into the 4% range only by June 2023.

It is pertinent to note that India's retail inflation rate has been exceeding the RBI's upper target range for the past five consecutive months.

FICCI in its statement, citing economists, said that the Central Bank is expected to maintain a hawkish stance throughout the calendar year 2022, adding that the policy repo rate is forecasted at 5.65% by the end of the fiscal year 2022-23, with a minimum and maximum range of 5.50% and 6.25% respectively.

As per the statement, there was some optimism in the outlook for the global economy earlier this year amid supply-side obstacles showing signs of easing and pandemic fears decreasing due to increasing vaccination coverage. However, the escalation of the Russia-Ukraine conflict interrupted the recovery process yet again.

The statement further said that the participating economists were divided in their views on whether the global economy is headed towards a recession.

The industry body highlighted the need for RBI to continue addressing liquidity constraints, particularly for MSMEs while ensuring that India's financial system is not subjected to additional strain in the form of increased non-performing assets.

It suggested that the government can aid GDP growth recovery by ensuring that the planned spending target is not curtailed, and higher capital expenditure as outlined in the Union Budget 2022-23 announced earlier this year is realized.

FICCI also recommended certain measures including nudging states to undertake a cut in value-added tax on fuels, better forecasting and planning for agricultural commodities, and climate-proofing agricultural practice amid rising extreme weather events.

India is heavily focusing on public infrastructure as it has a huge potential in multiplying economic growth. The Central government has proposed to raise capital expenditure by 35.4% to 7.5 lakh crore in the Union Budget for 2022-23.

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Updated: 21 Jul 2022, 02:27 PM IST
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