FICCI downgrades India GDP growth to seven percent for FY23

“Growth forecast has been downgraded from the 7.4 percent estimate in the previous survey round (April 2022) owing to geopolitical uncertainty and its repercussions for the Indian economy,” the industry body said.

The gross domestic product (GDP) growth is estimated at 14 percent and 6.2 percent for the first and second quarter of  FY 2022-23, respectively.

"The Indian economy is not immune to global volatility, as is evident from the deepening inflationary pressures and increasing uncertainty in financial markets," said the industry body.

During its Economic Outlook Survey (July 2022), participants pointed out that these factors are exerting pressure on India's economic prospects and are likely to delay the recovery.

The survey pointed out that major risks to India’s economic recovery include rising commodity prices, supply-side disruptions, bleak global growth prospects with the conflict prolonging in Europe.

"A slowdown in the Chinese economy is also expected to have an impact on India's growth. Increased input cost is impairing discretionary spending as these get passed on to the final consumer through higher selling prices," it said.

Economists participating in the survey were, however, divided in their views on whether the global economy is headed towards a recession.

"However, a majority of economists believed that it is difficult to predict the occurrence of a global recession, at present. The duration of the conflict in Europe will determine whether the present slowdown translates into a recession. Nevertheless, possibility of a prolonged slowdown remains on the horizon," the survey revealed.

There was a unanimous view among the survey participants that although the Indian economy is expected to face a slowdown in the near-to-medium term, it will still grow consistently to emerge as the fastest growing economy in the world.

As per the Survey, slowdown in major economies particularly in India's major trade partners is anticipated to impact India’s exports which had cushioned GDP growth in the face of a lack of effective domestic demand.

"Additionally, while healthy corporate and bank balance sheets is an encouraging sign for the domestic investment climate; declining global demand, muted consumer sentiments, increasing interest rates, and margin pressures are impeding private consumption and investment growth," it noted.

The survey said that the Reserve Bank of India (RBI) would need to continue addressing liquidity constraints, particularly for MSMEs while ensuring that India's financial system is not subjected to additional strain in the form of increased NPAs.

"Further, the Central and State governments must prevent any reduction in aggregate demand and if necessary, support it through higher revenue expenditure.

"The government must ensure adequate support for those in the lower income strata and bolster the subdued rural demand," it said.