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Rating agency Icra has retained its previous growth forecast of 7.2 per cent for India for the current fiscal (FY23), aided by a revival in contact-intensive services owing to pent-up demand, and a back-ended pick-up in government and private capex. It said growth is likely to pick up to pre-Covid levels on the back of pent-up demand, even though on an annualised basis, the absolute numbers will be falling from Q1 (13.5 per cent) to a much lower level in Q2 and further down in the two remainder quarters due to the high base.

The agency expects the growth momentum to lose steam and slows down to 6.5-7 per cent in Q2 and further 5-5.5 per cent each in Q3 and Q4 of FY2023 due to base effect, which is still higher the RBI forecast for these two quarters as she foresees a broad-based pick-up in private sector capex beginning from end of 2022, notwithstanding the higher-than-expected capacity utilisation of 74.5 per cent in Q4 FY22. It said the record generation of average daily GST e-way bills in August, owing to pre-festive stocking, indicates a revival in confidence and this, coupled with softening commodity prices, bodes well for the upcoming festive season. However, the decline in the output of key kharif crops such as paddy and flagging external demand pose risks to growth and remain the key monitorables.

The agency sees GVA (gross value add) growth 7 per cent and average retail inflation 6.5 per cent and wholesale inflation 10.1 per cent and the current account deficit nearly trebling to $120 billion or 3.5 per cent of GDP by March from $38.7 billion or 1.2 per cent in FY22. The latter, along with buoyant imports, following relatively stronger domestic demand, is expected to lead to a sharp widening of the CAD to 3.5 per cent in FY23, she said, adding although some relief is likely. Besides, gross fiscal deficit will print in at Rs 15.87 lakh crore or 6.7 per cent of GDP, which will be below the revised estimate of Rs 15.91 lakh crore or 6.9 per cent. It noted that the worst will be the rupee, which may plunge to 83 to a dollar by December and the 10-year G-sec yields to range 7.3-7.8 per cent in the rest of the year.