India’s industrial production posted a moderate increase in Feb-22 to 1.7%YoY from 1.5% in Jan-22. The accompanying granular data underscores continued weakness in consumption – with both consumer durables and non-durables in contraction possibly reflecting the impact of elevated inflation and a moderating trend in rural demand seen of late. However, on a positive note, there appears to be some back-loaded recovery in investment related sub-sectors in Q4 FY22, possibly led by a pick-up in Government spending ahead of the fiscal year end. Growth for both capital goods and infra & construction goods was revised up for Jan-22, adding on to the gains posted in Feb-22.
Looking ahead, downside risks to growth have swelled. The swift run-up in commodity prices, anticipated slowdown in global growth, lagged sizeable pass-through of fuel costs to consumers underway and its impact on disposable incomes are likely to weigh on consumption, private investment and export more emphatically in H1 FY23. As such, on closely monitoring the evolution of risk factors, especially on the geopolitical front we now revise lower our FY23 GDP growth forecast to 7.3% from 7.5% earlier
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