Nomura lowers India's 2023 GDP growth forecast to 4.7%

13 Jul 2022 , 02:06 PM

As concerns about a global recession increase in an atmosphere of rising prices, analysts at Nomura have lowered India’s growth prediction for 2023 from 5.4% to 4.7% because they anticipate a slowdown in growth over the coming year.

“Medium-term obstacles include higher inflation, tighter monetary policy, stagnant private capex growth, the power squeeze, and a decline in global GDP. Consequently, we decreased from 5.4 percent our 2023 GDP growth forecast “Aurodeep Nandi and Sonal Varma wrote a note for the company that said that it had a profit margin of 4.7%.

They forecast GDP growth of 7.0% for FY23 and 5.5% for FY24.

The Indian economy has been growing faster than it did before the pandemic, with improvements in consumption, investment, industry, and the external sector all contributing to the rise.

But inflation is still a problematic issue. The core CPI inflation fell to 5.9% from 7.1% while the CPI inflation slowed to 7.0% on an annual basis in May from 7.8% in April. A favorable base, a reduction in fuel tariffs, and reduced bullion prices all contributed to this moderation.
For the sixth consecutive month, the rate of retail inflation has exceeded the tolerance band set by the Monetary Policy Committee (MPC). Compared to the RBI’s projection of 7.5%, it has averaged 7.3% in Q1 FY23.

“Upside risks persist from the sustained pass-through of higher input costs, services reopening pressures, anticipated power pricing adjustments, and rising inflationary expectations,” Nomura said. This is despite the government’s recent fiscal moves to combat inflation.

In an effort to combat inflation, central banks around the world are now anticipated to raise rates sharply, even at the expense of growth.
After an interim increase of 40 bps at the beginning of May, the RBI increased the repo rate by 50 bps to 4.90% in June.

However, economists believe that the RBI may decide against a 50 bps rate hike in the upcoming sessions due to the slightly slower rate of inflation increase.