*****India GDP Growth: Fast growth still on, but inflation… – The Economic Times

Clipped from: https://economictimes.indiatimes.com/opinion/et-editorial/fast-growth-still-on-but-inflation-/articleshow/91925978.cms

Synopsis

The sequential slowdown in growth from 20.3% in the first quarter of 2021-22 through 8.5% in the second and 5.4% in the third, before reaching 4.1% in the last quarter, is expected to be reinforced as the low base effect of the prior year is withdrawn and fresh supply disruptions affect commodity, food and fuel prices.

An anticipated slowdown in the last quarter still kept India on track to be the fastest-growing major economy in 2021-22. Data released by the National Statistical Office (NSO) on gross domestic product (GDP) on Tuesday showed growth slowing to 4.1% in January-March. But this did not significantly alter the full year’s number, which was revised to 8.7% from the projection of 8.9% in February. All demand components – consumption, investment and exports – are now above pre-pandemic levels, although the picture is clouded by

persistent

NSE -0.55 % inflation, an interest rate upcycle and a ballooning imported energy bill. Sectorally, agriculture growth moderated, and industry and services – except contact-sensitive sectors – have climbed out of the trough.

The sequential slowdown in growth from 20.3% in the first quarter of 2021-22 through 8.5% in the second and 5.4% in the third, before reaching 4.1% in the last quarter, is expected to be reinforced as the low base effect of the prior year is withdrawn and fresh supply disruptions affect commodity, food and fuel prices. Manufacturing contracted in January-March, although it posted a smart recovery for the full year. Labour-soaking agriculture and construction saw a sequential acceleration. Government expenditure propped up services growth in the last quarter.

India’s recovery from the pandemic is now complete in terms of national income accounts. The revival of capital formation could have sustained the growth trajectory if the external environment were benign, which it is not. The Reserve Bank of India (RBI) in April lowered its estimate of the current fiscal year’s GDP growth from 7.8% to 7.2%, and there is a likelihood of a further downward revision at its next review of monetary policy in June as it pushes the policy interest rate closer to its pre-pandemic level. A favourable monsoon alongside concerted fiscal intervention to stabilise retail inflation – which reached an eight-year high of 7.8% in April – could temper the monetary tightening that is expected to slow down the economy.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s