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Domestic ratings agency ICRA has cut its FY23 real Gross domestic product (GDP) growth estimate by a sharp 0.8 per cent to 7.2 per cent. It attributed the downward revision to elevated commodity prices and also fresh supply chain issues arising from the conflict in Ukraine. It noted that real GDP growth is likely to moderate to 3-4 per cent in Q4FY22 from 5.4 per cent in Q3FY22, which will lead to FY22 real GDP growth rate at 8.5 per cent.

The report said as expected, the third wave had a much smaller impact on confidence levels relative to the first two waves. It said while the early data for March 2022 is mixed, the Russia-Ukraine conflict and the associated surge in commodity prices has heightened uncertainty, and the expected margin compression is likely to squeeze GVA growth. It stated that higher prices of fuels and items such as edible oils are likely to compress disposable incomes in the mid to lower income segments, constraining the demand revival in FY23.

According to the report, exports of some items will rise to meet global demand amid the supply crunch, and the capacity utilisation levels will rise to 74-75 per cent in Q3 FY23 from 71-72 per cent in Q4 FY22, and this can lead to a modest delay in the much awaited broad-basing of capacity expansion by the private sector. It said an early kick-off of the Centre's budgeted capex programme remains crucial to boost investment activity in first half of FY23.