Ficci’s survey of economists said the central bank will exercise restraint to conduct a policy reversal and will face short-term spikes in inflation.
FICCI is India’s largest and oldest top firm, founded in 1927. FICCI’s history is inextricably linked to India’s struggle for independence, industrialization, and rise as one of the world’s fastest-growing economies.
FICCI, a charitable organization, is a non-profit firm that represents India’s business and industry. FICCI represents the industry’s opinions and concerns in a variety of ways, stimulating debate and engaging with policymakers and civil society. It supports over 2,50,000 enterprises from the Indian private and public sectors, including world corporations, building on the power of various regional chambers of commerce.
This is the main call for the Indian industry, policymakers, and foreign community, to provide a recovery and consensus place in the fields and between fields.
The Survey by FICCI:
The survey was released on April 3 by the Federation of Indian Chambers of Commerce and Industry (FICCI). According to the survey, India’s yearly median GDP growth projection for 2022 2023 is 7.4 per cent. According to the Economic Outlook Survey, minimum and maximum growth rates are expected to be 6.0 per cent and 7.8 per cent, respectively.
According to the industry chamber’s survey, agriculture and allied operations are expected to grow at a median of 3.3 per cent in 2022-2023. During the fiscal year, the industry and services sectors are predicted to rise 5.9 per cent and 8.5 per cent, respectively.
The analysts of the Trade Association also warned that the risks of dropped undergrowth could continue to increase and form a serious obstacle to the global recovery, the Ukraine conflict quotes, and the Current explosion of Covid19.
According to the survey, which was based on responses from leading economists representing industry, banking, and financial services sectors, the current crisis may exacerbate price rises through imported commodities, with average wholesale price index-based inflation estimated at 12.6 per cent in the 4th quarter of 2021-22.
Inflation based on the CPI is expected to be 6.0 per cent in Quarter 4 2021-22 and 5.5 per cent in Quarter 1 of 2022-23, according to the FICCI’s Economic Survey. It also stated that the median CPI-based inflation projection of 5.3 per cent in 2022-23 may fluctuate within a range of 5.0 per cent and 5.7 per cent.
Meanwhile, the survey predicts a drop in CPI-based inflation in the following fiscal year, which has been hovering around the RBI’s target range since January-February 2022.
Concerns about the rise in commodity prices:
“Prolonging this battle will further damage supplies of major raw materials, including natural gas, crude oil, food, fertilizers, and metals,” the poll economists stated, referring to the Russia-Ukraine conflict. They believe that global inflation will peak in the first half of 2022 and then moderate.
“Surging crude oil prices are anticipated to significantly influence India’s macros,” the analysts said, adding that “increase in oil prices coupled with the sharp decline in Rupee value is inflating India’s import bill, adding to the stress on the current account.”
The economists noted that cost escalation is weighing heavily on producers’ CAPEX plans as they presented their overall assessment of the Russia-Ukraine issue and its influence on the economy. They also stated that private demand and investment should be prioritized to drive growth from 2022 to 2023.
Despite the concerns of the poll, economists stated that the Indian economy is well-positioned in the medium run. However, they urged that the Union government’s fiscal policy be proactive and that inflationary pressures may be alleviated through excise reductions or subsidies. “As inflationary pressures intensify, this will be critical to protecting private consumption expenditure,” they warned.
On the Reserve Bank of India’s Monetary Policy:
According to the FICCI’s Economic Survey, “While it is difficult to predict the exact impact of the conflict on the global economy, much will hinge on the conflict’s duration and subsequent governmental reactions. The US and European countries have imposed sanctions on Russia, which are having ramifications in the real and financial sectors.”
“Global growth could fall fifty to seventy-five basis points, further dampening expectations of a post-reproductive recovery,” the economists said, adding that the overall picture remained volatile.
Economists expressed their thoughts on the monetary policy of the Reserve Bank of India (RBI), which is due to be released on April 8, 2022. They said the committee experts would consider a short-term transient increase in inflation.
“By keeping the repo rate steady as per the April announcement, the RBI will continue to support the ongoing economic recovery,” the survey added. Economists believe the RBI may consider revising its stance in the second half of this financial year (2022), with a rate hike from fifty to seventy-five basis points expected before the end of the year.
Also, noting supply-driven inflation in India, economists believe that government support in the form of fiscal measures such as reductions in excise duty and VAT on gasoline and diesel by the Centre, as well as states’ ability to address some immediate concerns about inflation, could help.
“It is essential that MSMEs maintain their financial flows to sustain their operations. The poll said that the availability of additional financing for MSMEs should be ensured, and bank margins should be reduced from 25% to 20% and 10% to 15%.
Apart from that, it is advised by economists that the provision of a ninety-day prohibition on classifying MSMEs’ working cycles over dues into NPAs be reconsidered and that the maximum be expanded to 180 days.
Edited by Prakriti Arora