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India Ratings and Research (Ind-Ra) in its latest report has said that India’s Gross domestic product (GDP) is likely to grow at 7.6 per cent year-on-year in 2022-23. It said after a gap of two years, the Indian economy will show a meaningful expansion, as the real GDP in 2022-23 is expected to be 9.1 per cent higher than that in 2019-20 (pre-COVID level). 

However, the report said the size of the Indian economy in FY23 will be 10.2 per cent lower than the FY23 GDP trend value. It noted that a continued weakness in private consumption and investment demand is estimated to contribute 43.4 per cent and 21 per cent, respectively, to this shortfall. It said if the impact of Omicron on the fourth quarter growth turns out to be greater than its estimate, then there could be some upside to 2022-23 growth originating from the base effect.

Ind-Ra further said the government will not be in a hurry to move towards fiscal consolidation, which means there will be a significant amount of fiscal deficit even in the 2022-23 Budget, essentially to support growth. It expects the fiscal deficit to come in at 5.8-6 per cent of GDP in 2022-23. as inflation trajectory is on the higher side and economic recovery is still fragile, RBI will resist from raising policy rate in the near future. It also expects the current account deficit in FY23 to widen to 2.3 per cent of GDP.