Jan-23 Macrobook - Economic outlook

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Jan 06, 2023

India Macrobook Jan-23

Adverse global spillover, tightening of financial conditions, and waning of pent-up demand to moderate India’s GDP growth to 6.0% in FY24 from an estimated level of 6.8% in FY23. We expect CPI inflation to revert to the target band and come close to 5.3% in FY24 from an estimated level of 6.7% in FY23. WPI inflation is likely to show relatively faster deceleration to 2.0% in FY24 vis-à-vis an estimated level of 9.7% in FY23. After stepping down on monetary aggression in Dec-22, we expect the RBI to further moderate its rate increase to a normal dose of 25 bps hike in Feb-23 policy review. FY24 fiscal deficit likely to consolidate by 0.5-0.6% of GDP: Expect 10Y g-sec yield to moderate towards 6.75% in end FY24 from 7.40% in end FY23; Expect current account deficit to moderate towards 2.5% of GDP in FY24 (on lower commodity prices and deceleration in growth momentum) from and estimated level of 3.1% in FY23. BoP is projected to remain in deficit (albeit a moderate one) at USD 14 bn in FY24 from an estimated deficit of USD 38 bn in FY23; We expect USDINR to see mild weakness in FY24, trading close to 85.5 levels by end FY24 vis-à-vis our projected level of 83.5 by end FY23