Slowing global activity, domestic monetary conditions, and sticky commodity prices will push the Indian economy to a soft landing in FY24, but it will still perform better than peer economies, according to analysts at Barclays. Amid a volatile environment, Barclays analysts have forecasted India’s GDP growth at 7 per cent in FY23, before declining to 6 per cent in FY24. The downgrade in GDP growth is accredited to a dragging manufacturing activity and weaker exports.
Global economic instability, through trade and financial channels, is bound to trigger some negative spillovers on the Indian economy. However, despite the various policy and supply shocks to growth and inflation, India has been able to maintain momentum in the economy, said Rahul Bajoria, chief India economist, Barclays. “Indeed, there are several domestic factors that make us confident that India can achieve GDP growth of at least 6% pa over 2022-2023, even as the rest of the world slows,” Bajoria said.
Earlier, Barclays analysts had projected the growth forecast to 6.5 per cent. However, seeing the global headwinds, along with the tightening of the domestic monetary policy, the forecast saw a dip of 50 basis points. “This 50bp downgrade reflects largely weaker exports and manufacturing activity, as well as some room for discretionary services demand to moderate. We generally expect both private consumption and private investment to slow in growth terms,” the report added. The growth trajectory is expected to become steady at 6.5 per cent in FY25.
Coming to inflation, the Barclays report noted that the CPI inflation is likely to be above RBI’s upper tolerance level of 6 per cent in the current financial quarter (October-December). The central bank’s monetary policy committee (MPC) held an off-cycle meeting on November 3, drafting an explanation to the government as to why it failed to cap inflation within tolerable levels. The MPC is scheduled to meet again from December 5th – 7th and is expected to hike the repo rate by another 35 basis points, Barclays analysts said. With a 190 basis point hike since April, 2022, the RBI has almost reversed all rate cuts it undertook between 2019-2020.