Economic Outlook

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May 27, 2023

QuantEco Research || India Macrobook May-23

Core views We maintain our call of moderation in GDP growth to 6.0% in FY24; we expect CPI inflation to decelerate from 6.7% in FY23 to 5.3% in FY24 with a risk of 20-30 bps downside to our FY24 CPI estimate; MPC to remain on pause through CY23; With RBI’s recent two critical announcements we now expect core liquidity surplus to decline from Rs 1003 bn in end Mar-23 to Rs 647 bn by end Mar-24 (versus expectation of near zero earlier); We continue to maintain our 10Y g-sec yield call of 7.00% for Mar-24. Possibility of downside risk can emerge if the anticipated monsoon disruption from El Nino is moderate and global monetary policy cycle pivots earlier than expected; FY23 and FY24 current account deficit expected at 2.0% (USD 68 bn) and 1.4% of GDP (USD 53 bn), respectively and BoP forecast now stands adjusted to -0.5% (USD -17 bn) and 0.3% of GDP (USD 12 bn) respectively; 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.