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Corona’s third wave will affect GDP growth, RBI may postpone increase in reverse repo rate: Report

Where the third wave of corona released due to Omicron is only for a short period, but it can increase inflationary pressure. Research company Nomura has said this. According to him, with this, the increase in the reverse repo rate can be postponed from February to April.

Where the third wave of corona released due to Omicron is only for a short period, but it can increase inflationary pressure.

Where the third wave of corona released due to Omicron is only for a short period, but it can increase inflationary pressure. Research company Nomura has said this. According to him, with this, the increase in the reverse repo rate can be postponed from February to April. Research shows that the Indian economy has entered into a much better position in the third wave than in the second, but some of the bottlenecks and the re-imposition of restrictions by the state are starting to take effect.

Private airline Indigo had recently cut 20 per cent of its flights. Whereas, IRCTC reduced the frequency of Mumbai-Ahmedabad Tejas Express from five days to three days a week between January 12 and February 11.

Recovery expected to be delayed in services sector: Report

Nomura said the reimposition of restrictions is expected to delay recovery in the services sector, which was lagging behind pre-pandemic levels even before the third wave arrived. But it believes that manufacturing and non-contact intensive services will continue. Nomura further said that the previous waves of the coronavirus pandemic had caused supply disruptions and increased inflationary pressures. He says that they can persist even after the wave ends, which can have a bad effect on the balance sheet of the houses.

The research company believes that the third wave will have a bad effect on India’s growth in the fourth quarter of the current financial year. But the drop in momentum will be much less than in the second wave and will largely remain in service. It has lowered its GDP growth forecast for the fourth quarter from 5.2 per cent year-on-year to 3.2 per cent.

Inflation will increase: Report

However, Nomura also said that the GDP may look better in the first quarter of FY2023 with a slower pace in the fourth quarter of the financial year, indicating a recovery from the third wave. Speaking of inflation, Nomura said that while the third wave will lead to inflation, it will not be as bad as it was during the last two waves. It expects core inflation to rise from 5.6 per cent annually in December to 6.0 to 6.5 per cent in January. Keep in mind that RBI’s MPC has fixed inflation at 2 to 6 per cent.

In terms of policy, Nomura expects the Reserve Bank of India to extend the reverse repo rate hike to April from the current expectation of February. It expects an increase in the repo rate by 100 basis points in 2022, which will start from April.

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Shehnaz Ali
Shehnaz is a Corporate Communications Expert by profession and writer by Passion. She has experience of many years in the same. Her educational background in Mass communication has given her a broad base from which to approach many topics. She enjoys writing about Public relations, Corporate communications, travel, entrepreneurship, insurance, and finance among others.
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