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CRISIL cuts India's FY23 GDP growth forecast to 7.3 per cent

CRISIL cuts India's FY23 GDP growth forecast to 7.3 per cent

In a report, the rating agency said that inflation reduces purchasing power and would weigh on the revival of consumption -- the largest component of GDP which has been backsliding for a while.

CRISIL cuts India's FY23 GDP growth forecast to 7.3 per cent CRISIL cuts India's FY23 GDP growth forecast to 7.3 per cent

Rating agency CRISIL has lowered India’s real gross domestic product (GDP) growth forecast to 7.3 per cent from 7.8 per cent earlier for the financial year ending March 31, 2023, citing higher oil prices, slowing global demand for exports and higher inflation.

In a report, the rating agency said that inflation reduces purchasing power and would weigh on the revival of consumption -- the largest component of GDP which has been backsliding for a while.

“However, a normal monsoon forecast and rebound in contact-intensive services are expected to bring some succour,” it said while foreseeing the consumer price index (CPI)-based, or retail inflation rising to 6.8 per cent on average this fiscal, compared with 5.5 per cent last year.

“The impact of this year’s heat wave on domestic food production, coupled with persisting high international commodity prices and input costs, will cause a broad-based rise,” CRISIL said in a report.

It further highlighted that elevated commodity prices, slowing global growth, and supply chain snarls do not augur well for India’s current account balance.

“We expect the current account deficit (CAD) to widen to 3 per cent of GDP this fiscal, up from 1.2 per cent in fiscal 2022,” CRISIL said.

After falling by over 6 per cent on a year-to-date basis, the rupee hit a record low of 79.11-mark against the US dollar on July 1. CRISIL believes that the local currency may remain volatile with a depreciation bias in the near term due to a widening trade deficit, foreign portfolio investment (FPI) outflows and strengthening of the US dollar index owing to rate hikes by the US Federal Reserve and safe-haven demand for the dollar amid geopolitical risks.

“We expect the exchange rate to settle at 78-mark against the dollar by March 2023, compared with 76.2-mark against dollar in March 2022,” CRISIL said.

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