Our outlook for the likely macroeconomic environment in 2023 is as follows:

(a)   Inflation: The consumer inflation may average well within RBI tolerance bound of 4% to 6%, with occasional violations on both sides. The WPI may however ease as the raw material is corrected and wage hikes subside.

(b)   Fiscal Deficit: The fiscal situation of the central government may remain comfortable as the tax collections remain steady and revenue expenditure is controlled further. No major tax/duty concessions are expected. Increased food subsidy may be set off by lower fertilizer and fuel subsidy.

(c)    Rates: Expect benchmark yields to average in the 7% +/- 20bps range. The RBI may pause early as inflationary expectations ease. Deposit and lending rates may see some rise as RBI continues to normalize the liquidity and credit demand remains elevated.

(d)   Current Account: Expect current account balance to stay negative for most part of the year as import growth continues to outpace exports. The deficit may average around 1.75% to 2.25% for 2023.

(e)    Savings: Household savings may grow at an even slower pace as real wage growth remains poor. Aggregate corporate savings though may be higher due to continued deleveraging and rise in free cash flows.

(f)    Investment: The government investment expenditure may slow down in 1H2023 due to fiscal constraints. Private capex is unlikely to see any meaningful recovery in 2023. Overall, investment growth may see marginal growth.

(g)    Exchange Rate: USDINR may average close to INR80 +/- 2 and range on a negative current account.

(h)   Growth: The real GDP growth for 2023 may average around 6.3% on a slower global economy. Agriculture and Private Investment are key uncertainties to be watched carefully. A positive surprise in these two could help the economy to grow faster.

Overall, macroeconomic outlook is neutral with some negative bias.