RBI decreases FY22 GDP forecast to 9.5%, CPI inflation forcasts at 5.1%

Going forward, the inflation trajectory is likely to be shaped by uncertainties impinging on the upside and the downside. The rising trajectory of international commodity prices, especially of crude

The Reserve Bank of India (RBI) has reduced its gross domestic product (GDP) growth target for 2021-22 (FY22) to 9.5 percent from the previous forecast of 10.5 percent. Consumer price inflation (CPI), says the central bank, is likely to be 5.1 percent on FY22 compared to the previous forecast of 5.2 percent (5.2 percent in Q1; 5.4 percent in Q2; -4.7 in Q3; and 5.3 percent in Q4) with equally measured risks.

“Going forward, the inflation path is likely to be shaped by uncertainties that affect the ups and downs. Rising international commodity prices, especially crude oil, and commodity costs, pose a risk to inflation, ”the RBI said.

Add to this: “Rural needs remain strong and the expected normal rainfall is good for the body to maintain its strength, going forward. The increase in COVID-19 infections in rural areas, however, poses risks. ”

The slowdown in GDP estimates comes after a second wave of Covid infection that brought the Indian economy to a standstill a few weeks ago. GDP growth rate is close to what many leading economists and retailers have recently predicted.

Moody's, for example, increased India's GDP growth by 9.3 percent at FY22 and 7.9 percent at FY23.

"We expect economic decline in the April-June quarter, followed by a recession, which led to a 9.3% GDP growth for the fiscal year ending March 2022 and 7.9% for fiscal 2022-23," he said.

PMI services fell below 46.1 in May from 54 in April, while manufacturing PMI averaged 50.8 from 55.5. May's economic data, according to Nomura analysts, shows a significant impact on consumption and services, both in manufacturing and the export sector, and more importantly, strikes during the second wave are much smaller than the first wave across the board.

"The closure of travel indicators at the end of May and the estimated re-opening in all regions suggest that the worst is likely to end, although growth is likely to increase slightly in June alone. the first wave hit of -24.8 per cent in Q2 2020) and even less than the current consensus, "writes Solon Varma, India's chief executive and chief economist at Nomura, in a recent letter co-authored with Aurodeep Nandi.

Meanwhile, Barclays recently marked India's FY22 GDP growth of 7.7 percent in the case of bears, as the country is hit by the third wave of the ongoing Covid epidemic, which picks up another wave of disease and a two-month deadline to disrupt economic activity in the second half of the calendar year 2021 (H2). -21), equally divided between the third and fourth quarters (Q3 and Q4).