India’s economy probably grew at its fastest pace in a year in June qtr

By Manoj Kumar

NEW DELHI, August 31 (Reuters)India’s economy likely achieved its fastest annual growth in a year in the April-June quarter, economists said, expecting the pace to slow sharply this quarter and over the next two as as rising interest rates hit economic activity.

Gross domestic product (GDP) in the three months to June 30 was likely 15.2% higher than a year earlier, according to a Reuters poll this week. GDP from January to March increased by 4.1% compared to the previous year.

The last time India’s GDP recorded higher annual growth was in April-June 2021, when it was 20.1% above the pandemic-depressed level of the previous year.

The forecast for the last quarter ranged from 9.0% to 21.5%. The official release is scheduled for Wednesday at 12:00 GMT.

The Reserve Bank of India (RBI) raises its benchmark repo rate INREPO=ICE by 140 basis points since May, including 50 basis points this month, while warning of the impact of a global slowdown on the outlook for domestic growth.

The latest Reuters poll showed economists expecting growth this quarter to slow sharply to 6.2% a year before decelerating further to 4.5% in October-December.

Many economists expect a further rise in interest rates about 50 basis points next month, followed by another 25 basis points thereafter.

Consumer spending, which accounts for almost 55% of economic activity, has been hit hard by rising food and fuel prices, although monthly inflation has moderated over the past three months.

Sales of two-wheeled vehicles are an indicator of the health of the economy. In April-June, they were 5.03 million units, more than in the same periods of 2021 and 2020, but almost a fifth less than in 2019, according to industry data.

Economists say such frequently available indicators show India’s economy, Asia’s third-largest, is so far resilient to deteriorating conditions.

“More recent data suggests that resilience also continued in the third quarter (July-September),” said Shilan Shah, Indian economist at Capital Economics, Singapore, noting that the economy had better weathered the impact of the Omicron wave in January-March than it. had faced the previous wave of the pandemic.

But the economy faces downside risks as business investment plans could be affected by tighter monetary conditions and higher input costs, Shah wrote in a note to clients last week.

A depreciation of the rupee by more than 7% against the dollar this year has made imported items more expensive for consumers and businesses.

(Reporting by Manoj Kumar; Editing by Bradley Perrett)

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