Indian economy grows by 13.5 percent, but misses target


The jump came because of the previous quarter’s low base and economists have warned of a slowdown.

India’s economy grew 13.5 percent in the April-June quarter from a year earlier, its fastest pace in a year, amid fears that growth would slow sharply this quarter and the next two on the back of higher interest rates.

The jump came on the back of a boost in agriculture and manufacturing as the pandemic eased, official data released Wednesday showed.

Economists had predicted in a Reuters poll that gross domestic product in Asia’s third-largest economy would grow 15.2 percent year-on-year in the April-June quarter, compared to 4.1 percent in the previous quarter.

The apparently large jump in growth, which is below the 20.1 percent annual growth recorded in the same quarter of the previous year, is due to the previous quarter’s low base, and economists have warned that growth this quarter can be followed by a delay.

“Going forward, with global headwinds, India’s external sector could face a challenging time,” Rajani Sinha, chief economist at CARE Ratings, said in a note sent to Al Jazeera.

“It will be critical for domestic consumption and investment to gain momentum. The recovery in consumption demand has been uneven so far with weak demand in rural areas. While lowering inflation will support general consumer spending, an uneven monsoon will be a spoiler for rural demand,” she said.

In July, the International Monetary Fund revised its growth forecast for India from 8.2 percent to 7.4 percent for the current fiscal year, which started in April.

Despite the review, India would still be one of the fastest growing major economies in the world.

The double-digit growth in the April-June quarter comes at a time when the global economy is under pressure and most countries are experiencing high inflation. Prices have risen as the Russian invasion of Ukraine continues, leading to higher energy and food prices.

India’s economy was recovering from a pandemic-induced slump when a spate of Omicron-caused coronavirus cases from January prompted authorities to roll back some virus-related restrictions.

Multiple waves of COVID-19 outbreaks have hit India’s large informal sector hard, with unemployment rising to nearly 8.5 percent in August, according to data from the think tank Center for Monitoring Indian Economy.

India’s central bank forecast inflation this fiscal year at 6.7 percent and raised its key interest rate by 50 basis points to 5.4 percent, the third hike since May.

The economy grew 8.7 percent last fiscal year, after contracting 6.6 percent in fiscal year 2020-21.

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