UBS has reduced India’s FY23E real growth forecast to 7.7% YoY, from 7.7%. It stated that the economic recovery is still uneven. While indicators for the urban economy are doing well, they continue to be a problem for rural economies. For More Updates Stay Tuned With Moneycompanion.us.
It downgraded India’s GDP growth due to three factors: High global commodity prices (mainly energy), slower global growth (on Russia/Ukraine conflict, and China’s Covid-19-led slowdown in the June quarter), real Income shock from energy price rises, inflationary pressures, and the labor market’s incomplete recover.
Why UBS Selects As Lowered Point Of India’s GDP
This has led to weakness in domestic demand and the risk of reallocating limited fiscal resources away from CAPEX towards higher subsidies (food and fertilizer, etc.). To protect low-income households against the price shock.
“Despite this, there are encouraging signs that the residential realty sector is recovering and that capacity utilization levels are improving. On slower global growth and a shift to services, we believe goods exports will slow down. UBS released a note Friday stating that GDP growth will settle at 6% beyond FY23E.
According to the UBS India Composite Economic Indicator, GDP growth slows to 4.8% YoY for the March 2022 quarter (compared with 6.8% in the two previous quarters).
“We believe that the transfer-through of high commodity prices around the world (e.g. oil, fertilizer and edible oils) will continue to be a problem. UBS said that the impact of high commodity prices on the real economy will have a negative effect on households’ purchasing power and consumption, as well as limiting the fiscal space for CAPEX.
The International Monetary Fund (IMF), which had a forecast of India’s economic growth at 9% for FY23, has now lowered it to 8.2%. This is due to the impact of rising oil prices on private investment and consumer demand.
In its most recent policy meeting, the Reserve Bank of India (RBI) lowered India’s FY23 growth projection to 7.2% from 7.8% earlier. The World Bank also reduced India’s FY23 growth projection to 8%, from 8.7% in January.