India likely to see muted GDP growth, high inflation over next few quarters: Experts

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Experts at the India Today Conclave Mumbai 2022 said that the country is likely to see muted GDP growth and an inflation figure well over the target of 4%. 

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By Abhishek Chakraborty: India is likely to see a slowdown in GDP growth over the next few quarters combined with high inflation, stated an experts’ panel at the India Today Conclave Mumbai 2022 on Saturday.

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Pranjul Bhandari, Managing Director, Chief India Economist, Asean economist, HSBC, said: “We have done well in the last two quarters directing the post-pandemic growth, but the next few quarters are going to be tricky.” She said exports have been a key driver for India’s post-pandemic growth but they are now likely to decline, hurting our GDP.

 

Here's all that's happening at India Today Conclave Mumbai 2022

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“The second aspect is pent-up demand. After the lockdown, we went on a spending spree. But due to inflation, spending will stop and the pent-up demand will run its course and will slow down our growth. We are not forecasting a synchronized recession globally, but a partial recession is possible over the next year,” Bhandari said.

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‘INFLATION LIKELY TO BE 6%-7%’

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Speaking about inflation in India, Mahesh Vyas, Managing Director and CEO, Centre for Monitoring Indian Economy Pvt Ltd, said: “It’s unlikely that the inflation will come down to even 6%. So, expect inflation to be between 6% and 7%. It is unlikely that they will go much higher, but commodity prices are not fully predictable. I don’t see any spike in inflation, but I don’t see it coming down too much either.”

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Neelkanth Mishra, co-head, Asia Pacific Strategy, India Equity Strategist, Credit Suisse, agreed: “Inflation will be higher than the target of 4% but will be lower than the current figure of 7.5%.”

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On India’s growth prospects, he said: “It is much higher than what the consensus has been. The growth in future should be 7% or higher with an adjusted base.”

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‘ZERO TOLERANCE FOR MISTAKES’

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Speaking about the scene of the global market, Mishra said: “Markets now have zero tolerance for mistakes as the world has never seen such a high level of inflation. So, the risk of accidents is high.

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Chief Economist and Executive Vice President of HDFC Bank Abheek Barua said: “Despite the government’s best efforts, (post-pandemic) recovery is uneven and inflation is eating into people’s disposable incomes. If the government doesn’t address these comprehensively, recovery might not be sustainable.”

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“On the external side, we have certain pressure points such as the large current account deficit,” he added.

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Barua said that the option of injecting more money into the economy through central banks to overcome a crisis is not an option anymore and that should worry policymakers.

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Vyas said: “The next few quarters are going to be slower than what we have seen so far. However, India has survived the turmoil quite well. We have shown that we are very resilient to shocks.

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“The next two quarters are going to be modest. The biggest drivers of our growth, the large enterprises, have done remarkably well with efficient operations and profits,” he added.

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‘PRESSURE ON FOOD AND FUEL’

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Ajit Ranade, Vice-Chancellor, Gokhale Institute of Politics & Economics, Pune, said unlike the West, Indians are going to be hit by inflation the most in the areas of food and fuel. “We need to focus on these areas to dampen the impact. The government’s food scheme is doing well and needs to be extended although it’s keeping inflation up. The government also needs to look at its excise policies on petrol and diesel,” he said.

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