Why has UBS cut India’s GDP growth target for FY23?

After a slew of GDP downgrades, including the RBI, the Zurich based global investment bank UBS is the latest to join the India downgrade bandwagon. UBS has downgraded FY23 GDP forecast for India by 70 bps from 7.7% to 7%. In addition, UBS has specifically cautioned that India’s rural economy will remain a big drag, which is already evident from its high rural inflation and depleting purchasing visible in the last couple of months in 2022.

Some of the headwinds highlighted by UBS, for the Indian economy at the current juncture, include high energy prices, weak global growth and the escalating war tensions in Ukraine. UBS has highlighted that India had high vulnerability to commodity prices being a substantial importer of commodities, especially oil. UBS expects global commodity prices to transmit to the real economy, impacting company margins and household consumption.