New Delhi: The Indian economy has grown at perhaps the fastest rate in the last quarter of a year, driven by healthy consumption, but the pace of expansion is slowing as policymakers prioritize rising prices over growth.
According to a Bloomberg survey of economists, gross domestic product (GDP) is projected to grow by 15.4% in the three months to June from a year earlier. This is the sharpest reading since the April-June quarter of 2021 and compares with an expansion of 4.09% over the past three months.
The statistics ministry is scheduled to release the data for the first quarter of the financial year which began at 5:30 pm India time on Wednesday, April 1. Stock and bond markets will remain closed on local holidays.
Resumption of activity in India’s key services sector, after the pandemic was curbed, and a record jump in exports added to the momentum.
The momentum is likely to moderate in the coming quarters as the central bank hiked rates by 140 basis points this year to bring price gains under its 6% target range.
Rahul Bajoria, an economist at Barclays Bank, said, “The backdrop of resilient growth means that the RBI will continue to focus on controlling inflation.” “This makes its policy options relatively clear in the short term,” he said, anticipating a 50 basis point hike in rates in the two meetings in September and December.
The International Monetary Fund (IMF) maintains its world-beating growth tag to Asia’s third-largest economy as the lender forecasts it to grow at 7.4% this year and 6.1% thereafter. The rapid pace of expansion is crucial for India to attract investors and create jobs for its growing population.
risk
Apart from the rate hike, the global slowdown will also have an impact on the Indian economy. The US Federal Reserve’s resolve to continue raising rates until inflation is brought under control could hurt Indian exports and thus reduce domestic production.
The rupee on Tuesday tumbled to a new record low and major stock gauges fell amid a global surge in risk-off sentiment after central bankers delivered a hawkish message at Jackson Hole.
Challenges remain on the domestic front as well, with rising prices of staple food items such as rice and wheat amid factors such as climate change. If this is not controlled, it could again lead to food inflation, which comprises almost half of India’s consumer price index.
“External forces will act as counterweights, including the uneven onset of monsoon, sharp rise in commodity prices and an uncertain global environment following the effects of heatwaves on agricultural production,” said Radhika Rao, an economist at DBS Bank.
For now, the indicators are giving mixed signals on further movement. While global demand is moderating, hopes of a possible rapid revival in government spending and private investment are rising.
Gaura Sen Gupta, an economist at IDFC First Bank Ltd., said, “As growth improves, capacity utilization in the manufacturing sector has now increased. This is likely to support recovery in investment, provided that growth recovers from firms. Keep the outlook positive.”
According to a Bloomberg survey of economists, gross domestic product (GDP) is projected to grow by 15.4% in the three months to June from a year earlier. This is the sharpest reading since the April-June quarter of 2021 and compares with an expansion of 4.09% over the past three months.
The statistics ministry is scheduled to release the data for the first quarter of the financial year which began at 5:30 pm India time on Wednesday, April 1. Stock and bond markets will remain closed on local holidays.
Resumption of activity in India’s key services sector, after the pandemic was curbed, and a record jump in exports added to the momentum.
The momentum is likely to moderate in the coming quarters as the central bank hiked rates by 140 basis points this year to bring price gains under its 6% target range.
Rahul Bajoria, an economist at Barclays Bank, said, “The backdrop of resilient growth means that the RBI will continue to focus on controlling inflation.” “This makes its policy options relatively clear in the short term,” he said, anticipating a 50 basis point hike in rates in the two meetings in September and December.
The International Monetary Fund (IMF) maintains its world-beating growth tag to Asia’s third-largest economy as the lender forecasts it to grow at 7.4% this year and 6.1% thereafter. The rapid pace of expansion is crucial for India to attract investors and create jobs for its growing population.
risk
Apart from the rate hike, the global slowdown will also have an impact on the Indian economy. The US Federal Reserve’s resolve to continue raising rates until inflation is brought under control could hurt Indian exports and thus reduce domestic production.
The rupee on Tuesday tumbled to a new record low and major stock gauges fell amid a global surge in risk-off sentiment after central bankers delivered a hawkish message at Jackson Hole.
Challenges remain on the domestic front as well, with rising prices of staple food items such as rice and wheat amid factors such as climate change. If this is not controlled, it could again lead to food inflation, which comprises almost half of India’s consumer price index.
“External forces will act as counterweights, including the uneven onset of monsoon, sharp rise in commodity prices and an uncertain global environment following the effects of heatwaves on agricultural production,” said Radhika Rao, an economist at DBS Bank.
For now, the indicators are giving mixed signals on further movement. While global demand is moderating, hopes of a possible rapid revival in government spending and private investment are rising.
Gaura Sen Gupta, an economist at IDFC First Bank Ltd., said, “As growth improves, capacity utilization in the manufacturing sector has now increased. This is likely to support recovery in investment, provided that growth recovers from firms. Keep the outlook positive.”