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The Indian economy continues to recover amid a stuttering global economy; spillovers from external developments pose risks to the outlook

  • 21 Oct 2022
  • Post Views: 3049

The global economic slowdown intensified amidst high inflation, tighter financial conditions due to monetary policy tightening, geopolitical tensions, and a strict COVID containment policy in China. The IMF retained its growth forecast for 2022 at 3.2% but it revised the 2023 forecast downwards from 2.9% earlier in July to 2.7%. However, the Indian economy continues to be resilient with high-frequency data indicating a continuation of catch-up in the services sector and mixed recovery in the industrial sector, while the agricultural activity was moderately impacted by uneven rainfall. Accordingly, we retain our economic growth forecast for FY23 at 7% YoY. With respect to the elevated inflationary pressures and domestic demand holding up, the RBI hiked the repo rate by 50 bps to 5.90%. We see the terminal repo rate at 6.5% in the current policy tightening cycle.