India, much in line with the rest of the world, is witnessing a fresh wave of the virus. In response, most states have imposed restrictions, although less severe compared to the previous waves, and we expect this to impact GDP growth in Q4 FY22 by ~60 basis points. High frequency indicators for Q3 FY22 also indicate a moderation in growth along with tepid government spending. Accordingly, we revise our real GDP growth forecast for FY22 downwards to 9.3% YoY (with downside risk) from 10.5% YoY earlier. We expect the government to continue on its path of fiscal consolidation, as it maintains its fiscal deficit target of 6.8% of GDP in FY22 and sets a target in the range of 6-6.3% of GDP for FY23. With respect to the RBI, we see an increased possibility of delay in the policy normalization process to Q1 FY23, given the rising uncertainty from the third wave
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