ICRA lowers FY23 GDP forecast to 7.2% | Mint
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Business News/ Economy / ICRA lowers FY23 GDP forecast to 7.2%
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ICRA lowers FY23 GDP forecast to 7.2%

Icra also cut the GDP growth for the current fiscal to 8.5% from its earlier forecast and the National Statistical Office’s second advance estimate of 8.9%

An early kick-off of the Centre’s budgeted capex programme remained crucial to boost investment activity in the first half of FY2023. (Mint)Premium
An early kick-off of the Centre’s budgeted capex programme remained crucial to boost investment activity in the first half of FY2023. (Mint)

Ratings agency Icra on Tuesday sharply lowered India’s economic growth forecast for the financial year 2022-23 to 7.2% from 8% estimated earlier as rising fuel and commodity prices due to the Russia-Ukraine conflict are expected to impact domestic demand. It has also taken into account the downside risks arising from fresh lockdown in parts of China led by a surge in covid-19 cases.

The ratings agency also cut the GDP growth for the current fiscal to 8.5% from its earlier forecast and the National Statistical Office’s second advance estimate of 8.9%

“Following the elevated commodity prices and fresh supply chain issues arising from the Russia-Ukraine conflict, as well as the renewed lockdowns in parts of China, we have pared our forecast of India’s real GDP growth in FY2023 to 7.2%...Higher prices of fuels and items such as edible oils are likely to compress disposable incomes in the mid to lower income segments, constraining the demand revival in FY2023," said Aditi Nayar, chief economist, Icra Ltd.

However, the six months extension of free foodgrains under Pradhan Mantri Garib Kalyan Ann Yojana (PMGKAY) until September 2022 may continue to offer some respite to the food budgets of vulnerable households, it said.

Icra pointed out that the prolonged geopolitical tensions and high commodity prices may squeeze margins, impacting growth of the gross value added (GVA) during the period of the conflict. “Moreover, the K-shaped recovery appears likely to continue with the formal sector gaining market share in FY2023," Nayar added.

It further said that an early kick-off of the Centre's budgeted capex programme remained crucial to boost investment activity in the first half of FY2023. “However, a concern is that the execution risk is shifting to the states, with a considerable portion of the step-up in the GoI’s budgeted capital spending coming through the enlargement in the size of interest-free capex loan to the state governments to 1 trillion in FY2023," said Icra in a note.

Finance minister Nirmala Sitharaman had in the Budget announced an increase in outlay for the 'Scheme for Financial Assistance to States for Capital Investment’ from 15,000 crore in the current fiscal to 1 trillion for FY23, over and above the normal borrowing allowed for states.

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ABOUT THE AUTHOR
Dilasha Seth
" Dilasha Seth is a journalist reporting on macroeconomic policy for the last 11 years. She writes extensively on issues including international trade, macroeconomic data, fiscal policy, and taxation. At Mint, she reports on trade deals that India is signing besides key policy decisions of the Ministry of Finance. She closely tracked and covered the transition to the goods and services tax (GST) regime in 2017 and also writes on direct tax-related issues. In the past, she has worked with Business Standard and The Economic Times. She is based in Bangalore."
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Published: 29 Mar 2022, 04:28 PM IST
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