The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) estimated that the GDP growth rate for Financial Year 2022-23 would be at 7.2%. RBI Governor Shaktikanta Das said FY23 GDP growth forecast lowered to 7.2% from 7.8%.
The projection of GDP growth for 2022-23 is seen at 16.2% in Q1 (Apr-Jun 2022), 6.2% in Q2 (Jul-Sept 2022), 4.1% in Q3 (Oct-Dec 2022), and 4% in Q4 (Jan-Mar 2023).
FY23 GDP projection has assumed crude oil prices at $100 per barrel, the RBI Governor said.
"Real GDP Growth for the year 2022-23 is now projected at 7.2% with Q1 2022-23 at 16.2%, Q2 at 6.2%, Q3 at 4.1% and Q4 at 4%, assuming crude oil that is Indian basket at USD 100 per barrel during the year 2022- 23, said RBI Governor Shaktikanta Das after the MPC review meeting.
The RBI Governor noted that inflation and growth projections are fraught with risk given the volatility in the international markets. "It may be noted that given the excessive volatility in global crude oil prices since late February and extreme uncertainty over evolving geopolitical tensions, projection of growth & inflation is fraught with risk and largely contingent upon future oil and commodity price developments," RBI Governor said at the MPC briefing.
Although India’s direct trade exposure to countries at the epicenter of the conflict is limited, the war could potentially impede the economic recovery through elevated commodity prices and global spillover channels. Further, financial market volatility induced by monetary policy normalization in advanced economies, renewed COVID-19 infections in some major countries with augmented supply-side disruptions and protracted shortages of critical inputs, such as semi-conductors and chips, pose downside risks to the outlook."
"According to the second advance estimates released by the National Statistical Office (NSO) on February 28, 2022, real GDP rose by 8.9 per cent in 2021-22. Private consumption and fixed investment – key drivers of domestic demand – however, remain subdued, with these two components being only 1.2 per cent and 2.6 per cent respectively, above their pre-pandemic levels. On the supply side, contact-intensive services still trail the 2019-20 level. Nevertheless, the Indian economy is steadily reviving from its pandemic induced contraction, the RBI Governor's statement reads.
The RBI Governor's statement also says, "Going forward, robust Rabi output should support recovery in rural demand, while a pick-up in contact-intensive services should help in further strengthening urban demand. Investment activity may gain traction with improving business confidence, pick up in bank credit, continuing support from government capex and congenial financial conditions.
Capacity utilisation (CU) in the manufacturing sector recovered further to 72.4 per cent in Q3:2021-22 from 68.3 per cent in the previous quarter, surpassing the pre-pandemic level of 69.9 per cent in Q4:2019-20."