Hike rates

GDP will increase by 8.2p in FY23, RBI will increase rates by 100bp: Bank of America

The new year will herald the return to normalcy and see growth momentum pick up, a US brokerage firm said on Wednesday, setting the estimate of real GDP growth at 8.2% for fiscal 2022. -2023. Bank of America said the country entered 2021 on an upbeat note with a resumption of economic growth and well contained inflation, but the tragic second wave rocked the boat, led to the return of supply shortages and exerted pressure. price pressure.

“We see 2022 as the year of much anticipated normalization and normalization for India. We expect the growth recovery to pick up speed, driven by consumption,” said the house of brokerage in its outlook for the new year.

Low vaccination rates and the emergence of the Omicron variant have been reported as factors creating “considerable uncertainty” for growth, which will be less than the 9.3% in exercise 22 on baseline effects.

From a sector perspective, growth in agriculture, forestry and fisheries will be 3.5 percent in FY 23, compared to 4 percent in FY 22 , industry (7.1 percent vs. 10 percent), manufacturing (7 percent vs. 10 percent), while services are expected to grow 7.9 percent in FY 23 vs. 9 percent cent during fiscal year 22.

The brokerage said inflation would be on the rise going forward and pegged the overall figure at 5.6% in FY23, up 0.30%.

This will force the RBI to act on the rate front, raising the repo rate by 1 percentage point in FY 23, after the long hiatus it has taken right now, the house said. brokerage.

Fiscal consolidation will continue into the new fiscal year as the growth process continues, the brokerage said, fixing the budget gap at 5.8% in FY 23, after the government reaches the 6.8% budgeted in fiscal year 22.

The current account deficit will widen to 2% in FY 23, but will still be below the 2.5% threshold, he said.

The brokerage said that elections in key states, including Uttar Pradesh, will influence the economy in the new year, noting that a total of seven states will go to the polls.