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| India's economy to grow 7.8% in FY23, with risks skewed to downside: Report | | | The Indian economy is expected to grow by 7.8 per cent in 2022-23, mainly driven by the government's drive to push infrastructure spending and likely increase in private capital expenditure, ratings agency CRISIL said on Thursday.
However, the rating agency cautioned that the ongoing Russia Ukraine war and rising commodity prices do pose a downside risk to the growth.
The country is expected to register a growth rate of 8.9 per cent in the current fiscal ending March 31.
"Any potential upside due to the early end of a mild third wave of COVID-19 infections will be offset by the ongoing geopolitical strife stemming from Russia's invasion of Ukraine, which is creating a dampening effect on global growth and pushing up oil and commodity prices. The risks to growth are also tilted to the downside," it said.
Private consumption remains the weak link, owing to reduced direct fiscal policy support, CRISIL's Chief Economist Dharmakirti Joshi said while unveiling 'India Outlook, Fiscal 2023'.
As for the average Consumer Price Index (CPI)-based inflation, he said, it will stay firm at 5.4 per cent next fiscal - if the price of crude oil averages $85-90 per barrel - and takes into account the excise duty cuts announced last year.
However, upside risks will build if the geopolitical strife prolongs, keeping oil and commodity prices higher for longer.
Interestingly, when the price of crude oil averaged $110/barrel between fiscals 2012 and 2014, inflation was in double digits. That situation is unlikely to repeat due to the relatively benign domestic prices of foodgrains following sumptuous agricultural output and comparatively lower core inflation.
During that period, he said, food and core inflation, which together have 86 per cent weight in CPI, had averaged 9.8 per cent and 8.6 per cent, respectively.
"We believe the fiscal policy will need to be deployed more aggressively than envisaged in the Union Budget for next fiscal. This can be done by increasing allocation for employment-generating schemes and food subsidy, and cutting duty on petroleum products," Joshi said.
This can be a relief bridge for those most affected by the pandemic till such time the virtuous cycle of investment-led growth plays out in the labour market, and private consumption demand becomes self-sustaining, he noted. |
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