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    Citi cuts India GDP growth forecast for FY22 to 8.4%

    Citi cuts India GDP growth forecast for FY22 to 8.4%

    Citi cuts India GDP growth forecast for FY22 to 8.4%
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    By CNBCTV18.com  IST (Published)

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    Citi's lower GDP projections for the country come days after official data showed India's economy expanded 5.4 percent in the December quarter.

    Citi on Wednesday lowered India gross domestic product (GDP) growth forecast for the current financial year to 8.4 percent from 9 percent, citing a lower-than-expected reading for the quarter ended December 2021. The brokerage also lowered its GDP growth projection for the country for the financial year beginning April 2022 to 8 percent from 8.3 percent.
    The lower GDP projections for the country by Citi come days after official data showed the economy expanded 5.4 percent in the October-December period, missing economists' forecasts.
    The National Statistical Office (NSO) has forecast 8.9 percent growth in GDP for the economy in FY22 as against 9.2 percent previously.
    Citi sees India's GDP growth at 2.9 percent in the fourth quarter of the current financial year, as against the NSO's estimate of 4.8 percent.
    "We expect the 4QFY22 sequential momentum to be positive despite Omicron disruption as the high frequency activity indicators are already nearing pre-Omicron levels," the brokerage said.  It, however, also said that activity momentum in the February-March period is "unlikely to be strong enough to completely cover the lost ground from December-January".
    Citi expects India's nominal GDP growth to come in at 18.8 percent in FY22, and 13.4 percent in FY23. It said its FY23 GDP growth forecast pencils in average sequential momentum of 4.6 percent as against 6-7 pre-COVID.
    Citi highlighted the following growth drivers:
    • Reopening-led urban consumption revival to be a key support factor
    • However, rural growth again stands at a crossroads with lower consumption support from social security-related Budget spending but higher capital spending that could support non-farm rural jobs
    • Buoyed by capex focus of Union budget, still penciling in a revival in investment in FY23
    • Citi pencilled in a revival in investment in the financial year 2022-23 due to the capital expenditure focus in the Union Budget.
      "However, the risk to our capex revival view is tilted towards the downside due to repeated supply side disruptions. In particular, renewed input cost pressure and geopolitical tensions could derail investment recovery as investment decisions suffer from increased uncertainty," it added.
      If crude oil prices remain at elevated levels, the RBI may have to revise upwards its consumer inflation forecast of 4.5 percent, according to Citi. Given the central bank’s growth bias, the first repo rate hike may be pushed to the second half of FY23, most likely October, the brokerage said.
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