India’s economic recovery is likely to get stronger in 2022 led by a pick-up in consumption, which in turn is likely to push the country’s gross domestic product (GDP) to 9.1 per cent year-on-year (YoY) from 8 per cent, post a sharp contraction in 2020, said analysts at Goldman Sachs in their recent Macro Outlook 2022 note.

       “We expect consumption to be an important contributor to growth in 2022, as the economy fully re-opens driven by a notable improvement in the virus situation and adequate progress on vaccination. We also expect government capital spending to continue, see nascent signs of a private corporate capex recovery, and a revival in housing investment,” wrote Andrew Tilton, Goldman Sachs' chief Asia-Pacific economist in a co-authored report with Santanu Sengupta and Suraj Kumar.

       This consumption-led growth, however, will come with its own set of challenges. For one, Goldman Sachs expects a rise in core inflation as manufacturers pass on input cost increases to consumers as demand recovers with full economic re-opening. As a result, the global research and brokerage house has pegged the headline consumer price inflation (CPI) in India at 5.8 per cent YoY in 2022 from 5.2 per cent in 2021.

       Click here for a table on detailed projections

       Driven by higher oil and non-oil imports as the domestic economy re-opens and partly due to higher oil prices, analysts at Goldman Sachs expect India's current account deficit (CAD) to expand to $ 52 billion (1.5 per cent of GDP) in 2022 from $27 billion (0.9 per cent of GDP) in 2021.

       The Reserve Bank of India, Goldman Sachs said, is likely to hike repo rates by 75 basis points (bps) in 2022 with the first repo rate hike in Q2-2022 and reverse repo hike of 40bps by Q1-2022.

       Those at Morgan Stanley, too, are upbeat on the region’s growth rate. Given the level of vaccination, easing of Covid-led travel restrictions and releasing of pent-up demand, they believe, will lift the overall economic growth rate in the Asian region to 5.4 per cent in 2022 versus consensus forecast of 5 per cent.

       “We see this recovery extending beyond North Asian economies to the rest of the region, led by India and ASEAN,” said analysts at Morgan Stanley led by Chetan Ahya, their chief Asia economist. They have pegged India's GDP growth in 2022 at 7.5 per cent as compared to a consensus forecast of 6.8 per cent.

       Against the backdrop of a more broad-based recovery in the region, Morgan Stanley expects Asian inflation to pick up moderately in 2022, to 2.3 per cent (vs. 1.7 per cent in 2021). As regards India, they see inflation average around 5 per cent in 2022and pegged the repo rate at 5.5 per cent by the fourth quarter of 2022 (Q4-2022).