CRISIL sees inflation to 6.8 pc this fiscal

In a report, the rating agency said that inflation reduces purchasing power and will affect the revival of consumption, the largest component of GDP, which has been backsliding for a while.

A normal monsoon forecast and rebound in contact-intensive services are expected to bring some succour, it said, while foreseeing consumer price index CPI-based retail inflation rising to 6.8 per cent on average this fiscal, compared to 5.5 per cent last year.

The impact of this year's heat wave on domestic food production, coupled with persistent high international commodity prices and input costs, will cause a broad-based rise, CRISIL said in a report.

It further highlighted that elevated commodity prices, slowing global growth, and supply chain snarls do not bode well for India's current account balance.

CRISIL said that the current account deficit CAD will increase to 3 per cent of GDP this fiscal, up from 1.2 per cent in fiscal 2022.

After falling by over 6 per cent on a year-to-date basis, the rupee hit a new record low of 79.11 against the US dollar on July 1. CRISIL believes that the local currency will remain volatile in the near term due to a widening trade deficit, foreign portfolio investment FPI outflows and strengthening of the US dollar index due to hikes by the US Federal Reserve and safe-haven demand for the dollar in the near term due to geopolitical risks.

CRISIL said the exchange rate is expected to settle at 78 mark against the dollar by March 2023, compared with 76.2 mark against the dollar in March 2022.

Gartner predicts that it will be 5% in 2022: