Economic Survey estimates country's GDP growth at 8-8.5% for FY23

Mumbai, Jan 31 The range of 8.0-8.5 per cent growth for FY2023 assumed by the Economic Survey appears to have built in a cushion for any disruption caused by future waves of Covid, in our view, even as preparedness of economic agents has improved amidst the insurance offered by the bouquet of social safety nets. The continued thrust to government capex portended by the Economic Survey is enthusing, as it offers the best likelihood of instigating a durable growth recovery. This is in line with our own view that the upcoming Budget must fully allocate the amount of capital spending that can realistically be absorbed in FY2023.

"With the Economic Survey corroborating that spending will be back-ended in FY2022, we maintain our forecast of a modest fiscal slippage driven by the missed disinvestment target.," says ICRA chief economist, Aditi Nayar.

Following the conversion/switch of G-sec with the RBI, we now peg the gross dated borrowing of the GoI at Rs. 12.3 trillion in FY2023, she added.

Our, she went on, baseline assumption is that GDP growth will remain steady at 8.9 per cent in FY2022 and 9.0 per cent in FY2023. With the rebound in commodity prices leading us to revise up our WPI inflation forecast for FY2023 (to 4.0 per cent from 2.0 per cent), and creating an upside to our projection of a 5.0 per cent CPI inflation for FY2023, we now place nominal GDP growth for the coming year at 13.5%.

The stickiness in the CPI inflation suggests that its only a matter of time before the MPC commences on policy normalisation, with a change in stance to neutral in April 2022.