Domestic ratings agency Icra on Tuesday cut its FY23 real GDP growth estimate by a sharp 0.8 per cent to 7.2 per cent, primarily driven by the fallout of Russian invasion of Ukraine.
Its chief economist Aditi Nayar attributed the downward revision to elevated commodity prices and also fresh supply chain issues arising from the conflict in Ukraine.
It can be noted that the Reserve Bank expects FY23 GDP growth rate at 7.8 per cent. The central bank is set to come out with the first bi-monthly monetary policy for next fiscal year in early April, when it will revisit the number.
Real GDP growth is likely to moderate to 3-4 per cent in Q4FY22 from 5.4 per cent in Q3FY22, which will lead to FY22 real GDP growth rate at 8.5 per cent.
As expected, the third wave had a much smaller impact on confidence levels relative to the first two waves. While the early data for March 2022 is mixed, the Russia-Ukraine conflict and the associated surge in commodity prices has heightened uncertainty, and the expected margin compression is likely to squeeze GVA growth, it said.
"Higher prices of fuels and items such as edible oils are likely to compress disposable incomes in the mid to lower income segments, constraining the demand revival in FY23," Nayar said. Welcoming the extension of the free foodgrains scheme till September 2022, she said it will offer some respite to the food budgets of vulnerable households.