India is likely to post a 6.5% to 7.1% economic growth in FY2022-23. The Deloitte report said that despite the Reserve Bank of India (RBI) raising repo rates by 1.9 percentage points since April 2022, inflation has remained above its tolerance range for over 9 months now.
An impending global recession in a few advanced nations US, China as early as the end of 2022 or early next year may make the situation worse, it added. Deloitte expects, India to post a 6.5-7.1% growth during FY22–23 (April 2022 to March 2023) and 5.5-6.1% the following year contingent on the revival of the global economy and improving economic fundamentals.
India's gross domestic product (GDP) grew by 8.7% in the 2021-22 fiscal year. "We expect the upcoming festive season could give a much-needed boost to the consumer sector, which has not yet shown a sustained revival. Credit growth in the industry and services sector has also risen remarkably, suggesting that prospects for capex investments by the private sector are brighter.
"Sustained demand growth may be the most-awaited cue for a sustained push for investment. Exports and government spending may not support growth as much owing to moderating global demand and limited resources at disposal, respectively," said Rumki Majumdar, Economist, Deloitte India. Downside risks of higher inflation and commodity prices, and currency depreciation are significant.
"We expect global prices to ease by mid-2023 owing to a possible moderation in crude oil and industrial raw material prices, thereby easing pressures on domestic inflation," Deloitte said. However, the increased gap between Rupee and Dollar remains unpredictable. The Indian rupee's depreciation against the greenback is more due to the appreciation of the latter owing to the flight to safety among global investors amid global uncertainties.
"The domestic currency is appreciating against the euro, pound, and yen, suggesting that the macroeconomic fundamentals of the Indian economy remain strong," Deloitte said, adding the path to recovery has been lengthier than expected at the start of the year. The report mentioned that clarity will come after the analysis of the energy crisis in Europe and the economic slowdown in the US and China.
