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HSBC ups India’s FY22 GDP forecast to 11.2%, cuts inflation target to 4.7%

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Besides India, HSBC has cut 2021 CPI inflation forecasts for Hong Kong, Indonesia, Japan, Singapore, Thailand, and Vietnam. In Korea and Malaysia, the upward revisions were marginal

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India GDP | India inflation | Indian Economy


Puneet Wadhwa  | 
New Delhi 

A pick up in business activity coupled with a steady fall in COVID cases should aid a faster economic recovery across Asia, says a recent report by HSBC. It expects almost all economies in Asia to reach their pre-pandemic level by the end of 2021, if they haven’t already.

“The only exceptions are Japan and Thailand (next year), and the Philippines (beyond 2022). Encouragingly, we expect the rebound to have legs: growth in 2022 is likely to remain robust, still exceeding its pace in 2019, in all Asian markets, except for mainland China, Taiwan, and Vietnam,” wrote Frederic Neumann, co-head of Asian economics research at HSBC in a February 18 co-authored note.

As regards India HSBC has raised their growth forecasts from 9 per cent to 11.2 per cent for the coming fiscal year 2021-22 (FY22).

“By some measures, industrial activity is only a few percentage points below its pre-pandemic peak. Mobility, too, has largely recovered, which should help spur services demand, which is still 25 per cent below pre-pandemic level in the coming months,” the HSBC report said.

Despite rising crude oil and auto fuel prices in India, the research and brokerage house has lowered the consumer price inflation (CPI) forecast for 2021 to 4.9 per cent and to 4.7 per cent for 2022. Besides India, HSBC has cut 2021 CPI inflation forecasts for Hong Kong, Indonesia, Japan, Singapore, Thailand, and Vietnam. In Korea and Malaysia, the upward revisions were marginal.

“Despite recent market jitters about rising price pressures – and we certainly share concerns about near-term volatility – the medium term outlook for inflation in much of Asia remains relatively benign,” Neumann wrote.

From their April 2020 low of around $19 a barrel, Brent crude prices have flared 230 per cent to over $63 a barrel now. Petrol prices back home have breezed past Rs 100 per liter mark in some cities. This, some analysts fear, could stoke inflation and pose a threat to the fragile economic recovery.

CPI inflation continued to moderate in January, coming in at 4.06 per cent, driven by fall in perishable food components and favourable base effects, even as core inflation ticked up marginally.

Increasing input costs, higher commodity prices and seasonal upside in food price during the summer remains key risks to inflation, analysts at Barclays said, especially as pricing power returns.

“We see the gap narrowing between wholesale price inflation (WPI) and CPI in the coming months as well, as goods inflation rises faster than services. We are bumping up our FY22 inflation projections, and now see consumer price inflation to average at 4.8 per cent y-o-y versus our previous estimate of 4.0 per cent y-o-y. In terms of its half-yearly trajectory, we see inflation averaging 5.2 per cent in H1 FY 2021-22, moderating to 4.5 per cent in FY 2021-22,” says Rahul Bajoria, chief India economist at Barclays India.

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