Asia’s third-largest economy is coping well despite deteriorating global economic conditions. Since a year ago, India’s economy has seen its fastest annual expansion in a year. It grew 13.5 per cent in the April-June quarter.
But it is still lower than broadly predicted by economists, analysts and the Reserve Bank of India.
A Reuters poll of economists had predicted the economy would grow 15.2 per cent year-on-year in the April-June quarter, while a Bloomberg survey had it at 15.3 per cent. Rating agency ICRA had predicted that the GDP was likely to grow at 13 per cent, while the State Bank of India projected the growth rate at 15.7 per cent for April-June 2022.
Gross domestic product (GDP) in the three months to June 30 was 13.5 per cent higher than a year earlier. The last time GDP hit a higher annual growth was in April-June 2021.
“The strong June-quarter real GDP growth is essentially a reflection of a rather low statistical base effect and a reflection of pent-up demand following the exit from the Omicron wave during the March quarter,” Kunal Kundu, India Economist at Societe Generale, said.
The nation’s enormous services industry saw a surge in domestic demand due to the government easing travel restrictions. Private investment rose 20.1 per cent in the April to June quarter from a year ago. While private consumption increased by 25.9 per cent, and government spending rose by 1.3 per cent. The core sector output or the infrastructure factories’ output, expanded 4.5 per cent year on year in July.
With retail inflation above the upper limit, the Reserve Bank of India (RBI) was forced to hike rates. It raised its benchmark repo rate by 140 basis points in May, while warning about the impact of a global slowdown on domestic growth prospects.
The increase in the cost of food and fuel has significantly impacted consumer spending, even as monthly inflation has subsided over the past three months. “While we are convinced pace of easing of inflation would be slow, RBI is not far away from the end of its current rate hike cycle. RBI would stop hikes by end of 2022 even if the real policy rate remains negative,” Societe Generale’s Mr Kundu said.
“Resilience has continued in Q3 (July-September) too,” Shilan Shah, India economist at Capital Economics, Singapore, said. He warned that the economy faced downside risks because companies’ investment plans would be affected by tighter monetary conditions and rising input costs.
