In a report, JP Morgan predicted that India’s real GDP growth in 2022–2023 would be close to 7%. However, a sharp global slowdown is anticipated to cause a slowdown in economic growth in 2023–2024. According to the report, given the high level of uncertainty in the world, slowing growth, tightening monetary conditions, and low manufacturing utilization rate, a broader private investment cycle would also take time to fructify.
Despite the excellent performance, production is still about 7% below potential pre-pandemic trends, reflecting both the pandemic’s effects and the unfavorable effects of higher commodity prices in 2022 on trading conditions.
But compared to recent years, the balance sheets of businesses and banks seem to be in much better shape. Banks are eager to lend as corporate debt to GDP is at its lowest level since 2006. It will take time for a broader private investment cycle to bear fruit, though, given the increased level of global uncertainty, slowing growth, tightening financial conditions, and manufacturing capacity utilization that is still below 80%. A report was added. This year, the current account deficit (CAD) is anticipated to be greater than 3% of GDP. In 2023, a crucial policy objective should be bringing CAD back to manageable levels.
Once more, ongoing high-level fiscal consolidation is the key to CAD compression. The center aims to reduce the budget deficit to 6.4% of GDP this year and to 0.5% of GDP the following year. By lowering the deficit while keeping capital investment at a high level, the Fiscal Balance Act will achieve its goal.
India’s GDP growth may slow down sharply to 5.1% in 2023-24 and force the RBI to cut the key repo rate by 75bps in the second half of 2023, economists at Nomura have said.#RBI #RepoRate #GDP
— Markets Today (@marketsday) December 7, 2022
As growth slows and input price pressures ease, inflation is predicted to gradually decrease over the years 2023–2024. During this time, it is expected to remain stubborn.
The MPC is close to a moratorium and risks an eventual 25 basis point rate hike at its February review as a result of the RBI raising interest rates by approximately 300 basis points in 2022 and liquidity tightening, the report adds.
The sharp global slowdown that is weighing on exports and the ongoing normalisation of domestic fiscal and monetary policies, according to JP Morgan, will cause growth to slow in 2023–2024.
