Goldman Sachs, others raise India's FY22 GDP growth forecast

Those at Morgan Stanley, too, are upbeat on the region's growth rate. Vaccination, easing of Covid-led travel restrictions and releasing pent-up demand, they believe, will help economic recovery

Various analysts and brokerage houses have raised their projections for India’s economic growth in the current fiscal year on a low base of 7.3 per cent contraction in 2020-21 due to pick-up in consumption and dwindling Covid cases.

Goldman Sachs in its recent Macro Outlook 2022 note revised upward its projection for gross domestic product (GDP) to 9.1 per cent, from the earlier estimate of 8 per cent for calendar year 2022. For 2021-22 (FY22), it pegged economic growth at 8.5 per cent.

“We expect consumption to be an important contributor to growth in 2022 as the economy fully reopens, driven by a notable improvement in the virus situation and adequate progress on vaccination. We also expect government capital spending to continue, seeing nascent signs of a private corporate capital expenditure recovery and a revival in housing investment,” wrote Andrew Tilton, Goldman Sachs’ chief Asia-Pacific economist in a co-authored report with Santanu Sengupta and Suraj Kumar.

This consumption-led growth, however, will come with its own set of challenges.

For one, Goldman Sachs expects a rise in core inflation as manufacturers pass on input cost increases to consumers. As a result, the global research and brokerage house has pegged the headline consumer price inflation in India at 5.8 per cent year-on-year in 2022, from 5.2 per cent in 2021.

SBI Research upped its forecast of GDP growth to 9.3-9.6 per cent for the current fiscal year, from its earlier prediction of 8.5-9 per cent.

“We now believe that FY22 GDP growth rate could be in the range of 9.3-9.6 per cent. The reason for the upward revision is that India recorded only 11 per cent increase in Covid cases during the third quarter of 2021, second-lowest among top 15 most-affected countries, and the increase in cases has declined to 2.3 per cent in November over September,” said Soumya Kanti Ghosh, chief economic advisor, SBI Group.

Citing faster-than-expected recovery, rising consumer confidence, and the resultant spending spike, Swiss brokerage UBS Securities recently revised upward its growth forecast for the current fiscal year to 9.5 per cent, from 8.9 per cent pegged in September.

The brokerage also saw the economy clipping at 7.7 per cent in 2022-23 (FY23), but moderating to 6 per cent in 2023-24 since it expects the benefit of a low-interest rate regime to end by the end of FY23.

However, CARE Ratings retained its projection to 9.1 per cent with an upward bias.

The Reserve Bank of India also forecasts 9.5 per cent GDP growth this fiscal year, while the average projection ranges between 8.5 per cent and 10 per cent. The government projection is around 10 per cent.

In this regard, Fitch Ratings is an outlier which had lowered its projection to 8.7 per cent, from its earlier forecast of 10 per cent in view of the impact of the second Covid-19 wave in the country.