The new year will herald the return of normalcy and witness the growth momentum gaining steam, an American brokerage said on Wednesday, pegging the real GDP growth estimate at 8.2 per cent for FY2022-23.
Bank of America said the country entered 2021 on an optimistic note with recovering economic growth and well contained inflation, but the tragic second wave rocked the boat, led to the return of supply shortages and exerted pressure on prices.
''We see 2022 as the year of much awaited normalcy and normalization for India. We expect growth recovery to gain steam, driven by consumption,'' the brokerage said in its outlook for the new year.
The low vaccination rates and the emergence of the Omicron variant were flagged as factors which are creating ''considerable uncertainty'' for growth, which will be lower than FY22's 9.3 per cent on base effects.
From a sectoral perspective, growth in agriculture, forestry and fishing will come at 3.5 per cent in FY23, as against 4 per cent in FY22, industry (7.1 per cent versus 10 per cent), manufacturing (7 per cent versus 10 per cent), while services are estimated to grow at 7.9 per cent in FY23 as against 9 per cent in FY22.
The brokerage said inflation will be on the rise going ahead and pegged the headline number to be at 5.6 per cent in FY23, up by 0.30 per cent.
This will force the RBI to act on the rates front, by increasing the repo rate by 1 percentage point in FY23, after the long pause that it has undertaken right now, the brokerage said.
The fiscal consolidation will continue in the new fiscal year as the growth process continues, the brokerage said, pegging the fiscal gap to narrow to 5.8 per cent in FY23, after the government meets the budgeted 6.8 per cent in FY22.
The current account deficit will widen to 2 per cent in FY23, but will still be under the 2.5 per cent threshold, it said.
The brokerage said elections in key states, including Uttar Pradesh, will be influencing economics in the new year, pointing out that a total of seven states go to polls.
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