Swiss brokerage Credit Suisse expects the economy to continue to show positive surprises and record up to 9 per cent growth in the next fiscal.
For the current financial year too, the brokerage anticipates growth to be higher than the consensus forecast of 8.4-9.5 per cent, and printing in at around 10.5 per cent.
As a policy, Credit Suisse does not provide absolute growth numbers in its forecast.
However, an extrapolation of data available and projections indicate that economic growth could clip 9 per cent in 2022-23 period, which according to the brokerage is up to 400 basis points (bps) over the consensus numbers.
Neelkanth Mishra, the co-head of equity strategy for Asia Pacific and India equity strategist at Credit Suisse, told PTI that he expects meaningful upgrades to the GDP forecast as the economic recovery has surprised positively.
"We expect GDP getting an upgrade of 4 percentage points over the consensus for FY23 as output should get closer to the pre-pandemic trend than what is currently forecast.
"The economy is expected to continue to show positive surprises even though the recovery has so far been lop-sided but in the next three-six months most of low-income jobs should recover too," Mishra said on Thursday.
While warning that high energy prices could be a headwind, Mishra said the economy has the capacity to sustain faster import growth.
The pace of growth might moderate if imported energy prices (crude oil, gas, coal, fertiliser and palm oil) remain high.
Another drag could be low employment/re-employment in some key sectors like education, travel, construction materials and auto manufacturing, which are not yet back to the pre-pandemic levels.
However, these should improve as the economy continues to open up, helped by high seroprevalence, he pointed out.
According to him, other positives for higher growth is the recovery in consumer spending, strong equity fund-raising that has helped repair the risk capital that was lost during the pandemic, growing IT demand globally and the resultant around 5 lakh hiring in the offing and the pick up in dwelling construction.
On the markets, he said since the country's price-to-earnings premium of 21 per cent over global equities and 72 per cent over the emerging markets is already too high, further upside in the metric is unlikely.
In contrast to the steep downgrades that markets were used to in the pre-pandemic period, earnings forecasts for FY22 and FY23 have seen upgrades and the same should occur for FY24 too, he said.
On the domestic front, the macroeconomic backdrop is supportive too, with fiscal conditions improving after an 18 per cent rise in government debt to GDP during the pandemic.
In the first half of the current fiscal, revenue receipts were 16 per cent higher than the full year estimates and the central government's cash balances with the RBI are 1.5-2 per cent higher than normal as a share of the GDP.
This scenario supports the revival of states' capex.
While high energy prices are eroding the substantial balance-of-payments surplus of $40-45 billion now, the rupee is holding up much better than most other emerging market peers, as per Credit Suisse.
Mishra also said that risks from the new COVID variant Omicron or even the residual impact of the Delta variant may be higher for the global economy than for India but did not elaborate.
Photograph: Amit Dave/Reuters
