Economic Outlook

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Jun 26, 2023

QuantEco Research || India Macrobook Jun-23

We maintain our call of moderation in GDP growth to 6.0% in FY24 from 7.2% led by adverse global spillovers, impact of high interest rates on urban consumption, and fading of pent-up demand; We expect CPI inflation to decelerate from 6.7% in FY23 to 5.3% in FY24 with moderation in food, fuel, and core inflation – the latter being subjected to some degree of downward rigidity. If crude prices were to remain in the current range of USD 70-80 pb, it could accord a 20-30 bps downside to our FY24 CPI estimate; We maintain our 10Y g-sec yield call of 7.00% for Mar-24. We hold our FY23 and FY24 current account deficit forecast to 2.0% (USD 68 bn) and 1.4% of GDP (USD 53 bn), respectively, from 2.6% and 2.0% earlier and BoP forecast now at -0.5% (USD -17 bn) and 0.3% of GDP (USD 12 bn) respectively; We expect Fed to lead the rate cutting cycle in 2024 – this is likely to weigh on the USD as clarity on the timing of Fed pivot emerges in the coming quarters; We expect rupee to face backloaded appreciation pressures (aided by a favorable BoP outlook), with USDINR likely to move towards 80 levels by Mar-24