Into fiscal 2022-23, beyond the thrust from reopening gains, precautionary savings and sectoral normalisation to pre-pandemic levels, capex generation is likely to be next driver to raise and maintain growth on a higher plane.

With the government needed at the wheel in the initial phase, DBS expects the private sector to participate thereafter when ongoing deleveraging is complete. State elections are lined up ahead, majority of within the first half of next year.

Catalysts are in place for a renewed capital expenditure cycle, which could return growth to a more sustained uptrend.

While on-track recovery and above-target inflation make a case for policy normalisation, authorities are likely to be watchful of the new risk on the horizon—the Omicron variant, DBS said. Notwithstanding the caution, the bank still expects a gradual exit from the ultra-accommodative policy settings to continue.

DBS’s financial conditions index (FCI) for India shows the aggregate monthly index is a shade above the baseline (zero) mark as of late-October. Strong revenues and slower expenditure have helped to keep the FY22 fiscal slippage in check at the halfway mark.

The evolving pandemic situation is the biggest wildcard that the economy and world faces heading into 2022, DBS added.

Fibre2Fashion News Desk (DS)