Icra maintains India's GDP forecast at 7.2% for FY23

Rating agency Icra has retained its previous growth forecast of 7.2 percent for the current fiscal. At 7.2 percent, the number is marginally higher than most consensus forecast of 7 percent and 10 bps lower than what S&P forecast earlier this week.

Growth is expected to pick up to pre-Covid levels on the back of pent-up demand, even though on an annualised basis, the absolute numbers will be falling from Q1 (13.5 per cent) to a much lower level in Q2 and further down in the two remainder quarters due to the high base, the agency said.

The RBI is widely believed to again lower its growth forecast at its September 30 monetary policy review from the previous projection of 7.2 per cent.

"We maintain our GDP forecast of 7.2 per cent for FY2023, aided by a revival in contact-intensive services owing to pent-up demand, and a back-ended pick-up in government and private capex. While the annualised basis growth is expected to slow from Q1 to Q2 and further in H2, this is largely be optical in nature, growth is expected to pick-up compared to pre-Covid levels of FY20," Aditi Nayar, the chief economist at the agency said.

The record generation of average daily GST e-way bills in August, owing to pre-festive stocking, indicates a revival in confidence and this, coupled with softening commodity prices, bodes well for the upcoming festive season. However, the decline in the output of key kharif crops such as paddy and flagging external demand pose risks to growth and remain the key monitorables, she said.

She expects the growth momentum to lose steam and slows down to 6.5-7 per cent in Q2 and further 5-5.5 per cent each in Q3 and Q4 of FY2023 due to base effect, which is still higher the RBI forecast for these two quarters as she foresees a broad-based pick-up in private sector capex beginning from end of 2022, notwithstanding the higher-than-expected capacity utilisation of 74.5 per cent in Q4 FY22.