What is the FICCI opinion on likely GDP growth rate in the coming financial year?

In the last few weeks, a number of global rating agencies and brokerages have lowered the growth in GDP for FY23. The latest estimate of GDP growth has come from the FICCI Economic Outlook Survey which pegs the GDP growth for FY23 at 7.4%. However, FICCI has defined a complete likely range for growth. It has pegged GDP growth at 6% on the lower side and at 7.8% on the higher side, with their median GDP growth estimates falling at 7.4%.

The Economic Outlook Survey of FICCI has delved into the granular details of growth by putting out separate estimates for the primary, secondary and the tertiary sectors of the Indian economy. The median FICCI forecast is 3.3% for agriculture and allied activities while it has pegged industrial sector growth at 5.9% for industrial sector. Services sector, which accounts for 60% of overall GDP of India, has been pegged to grow at the rate of 8.5%.

These estimates also factor in major downside risks arising from disruptions, many of which look possible at this juncture. For instance, events like the Russia-Ukraine conflict, gold peg of the Rouble, rising cases of COVID-19 pandemic in China could add up to become serious medium term dampeners to growth. This could also impede the economic recovery underway in India. With WPI inflation at over 12%, the input cost risk is very significant.

FICCI has also put out detailed projections on the inflation front. FICCI broadly adheres to the RBI median inflation forecast of 5.3% for FY23. However, to be on the safer side, it does see inflation in a much wider range of 5% on the downside and 5.7% on the higher side. On the positive side, FICCI projects that oil prices would remain relatively restrained in the coming year which would have a primary and secondary impact in cooling inflation.

Finally, on the subject of their take on the RBI monetary policy stance, FICCI expects that the RBI may actually refrain from rate hikes on 08th April. RBI may even continue with current accommodative stance. However, there is a caveat. FICCI has warned that if inflation stayed rampant, RBI may be compelled to back-end rate hikes by 50-75 basis points in 2022. FICCI has called for fiscal support via lower excise levies to rein in inflation, but looks impractical.