Credit rating agency Acuite Ratings and Research forecast India's gross domestic product (GDP) growth at 7 per cent in FY23.

In a report, Acuite said India's annualised GDP growth in Q2 FY23 expectedly, expanded at a slower pace of 6.3 per cent year-on-year (YoY) as against 13.5 per cent in Q1 FY23, the latter led by the easing of favourable base impact created by the second Covid wave in the previous year.

Nevertheless, India's growth impetus driven by domestic demand as judged by high-frequency lead indicators continues to remain resilient, withstanding the uncertain and increasingly antagonistic global environment, the report said.

According to Acuite, while pent-up, as well as festive demand, has had a positive role to play in keeping up this momentum, there is a possibility of moderation in some of the lead indicators in the second half of the fiscal unless there is a sustainable and consistent uptick in rural demand.

The loss of working days in a festive heavy month may have caused a scare on the IIP in October, a sharper slowdown in global growth is likely to have a stronger bearing on growth from Q3 FY23 onwards, the report said.

Looking ahead on annualised basis, Acuite said as the favourable statistical effect tapers further, incremental GDP growth is expected to be on decelerating path.

For Q3 and Q4, growth is likely to slip closer to 4-4.5 per cent. This factors in incremental external risks and their impact on domestic growth, despite support from factors such as strength in services demand, upside in rabi sowing, capex-oriented government expenditure and the moderation in global commodity prices.

Taking into account the upside and downside factors, we had revised the GDP growth forecast only marginally to seven per cent in FY23, Acuite said.