UBS cuts India FY23 GDP growth forecast to 7%, flags risk of RBI failing

UBS cuts India FY23 GDP growth forecast to 7%, flags risk of RBI failing

"Elevated global commodity prices are not only expected to drag growth but also lead to tightening of financial conditions, which in turn may constrain expansion of economic activity."





April 22, 2022 / 02:11 PM IST





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UBS has downgraded its GDP growth forecast for India for the current financial year from 7.7 to 7.0 percent, adding that the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) risks failing to meet its inflation mandate.

The reduced forecast is one of the lowest expected by economists. Earlier this month, the RBI had surprised by lowering its own projection from 7.8 to 7.2 percent on risks from Russia's invasion of Ukraine.

The central bank's survey of professional forecasters released on April 8 pegged GDP growth for this year at 7.5 percent.

India's economy likely grew 8.9 percent in FY22, as per the statistics ministry's second advance estimate.

According to UBS, high global commodity prices, slower global growth, hit to domestic demand from the income shock of high fuel prices and elevated inflation, and the risk of the central government diverting money from capital expenditure towards subsidies will cause the Indian economy to grow at a slower clip this year than previously expected.

"There also seems to be a