icra: India’s economy will grow 12-13% in the first quarter: ICRA

The rating agency on Tuesday forecast the economy to grow 12-13 percent in the first quarter of the current fiscal year, citing the second-highest reading activity in 13 months in April. However, Icra maintained its annual GDP estimate of 7.2 percent for this fiscal year, citing concerns over inflation and consequent tightening of the Reserve Bank.

Aditi Nair, chief economist at ICRA, told PTI: “Our Business Activity Monitor 115.7 for April indicates that activity was about 16 per cent higher than a year ago (period) and had pre-covid levels despite global headwinds.”

This high growth is likely to continue in May, especially on an annual basis, which should translate into double-digit GDP expansion of 12-13 percent. However, it may not be sustainable and the annual increase in volume and activity may be moderate, he said.

According to him, higher input costs can reduce GVA growth by a single number. “Therefore, we maintain our GDP growth forecast for FY23 at 7.2 percent.”

Referring to concerns over rising inflation, he said the consumer price index is expected to average 6.3-7.5 per cent in the current financial year.

The biggest upside risks of inflation and growth come from fugitive fuel prices and the effects of the war in Ukraine. He says if the war is not short-lived, the impact will be far greater than expected.

This is the primary reason for keeping the low GDP growth forecast for the full year at 7.2 percent and the low base effect higher.

On the interest rate front, Nair said the central bank is expected to raise rates by 25 basis points each in its June and August policy review, and that the September move will depend on the direction of the war and its impact on commodity prices.

Earlier in the day, the company said in a report that it had monitored its business activity in April at 115.7, the second highest in 13 months and the lowest base exaggerated growth stood at 16.1 percent.

The index stood at 123.7 in March, compared to 107.8 in February.

The monitor contains high frequency indicators related to 14 industry and service sectors and is an index of high frequency economic indicators that measures economic activity every month.

The monitor is built using 14 monthly high frequency indicators with automatic production, output

Power generation, export of non-oil goods, rail freight, port goods transport and vehicle registration.