The global economic outlook turns gloomy amidst continued spillover from the protracted Russia-Ukraine war and synchronized monetary policy tightening by major central banks to combat inflationary pressures. The IMF downgraded its projection for global growth in 2022 and 2023. Encouragingly, the domestic economic recovery held its ground even as uncertainty shrouds the global growth, thanks to catch-up in the services sector and improvement in manufacturing activity. Accordingly, we retain our economic growth forecast for FY23 at 7% YoY, with Q1 FY23 growth estimated to be 13.8% YoY. In the context of elevated inflation and resilient economic recovery, the RBI raised the repo rate by another 50 bps to 5.40% in the August policy meeting. We retain our view that the terminal rate in the current policy tightening cycle will be around 6%.
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