Economic growth slows to 4.1% y/y in Q4 of FY 2021-22

NEW DELHI/BENGALURU: India’s growth slowed further in the first three months of 2022, the National Statistics Office said Tuesday, with inflation and higher oil prices denting a postpandemic recovery.

Asia’s third-largest economy grew 4.1%, year-on-year, in the last quarter, NSO data showed.

Annual growth for the 12 months to the end of March stood at 8.7%.

Rising global commodity prices have sparked concern among policymakers, with India’s central bank announcing its first interest rate hike in nearly four years this month.

The country of 1.4 billion people imports more than 80% of its crude oil and the cost of meeting domestic fuel demand has soared since Russia invaded Ukraine in February.

India is also the world’s largest importer of edible oils, prices of which are at record highs since the conflict began.

“The pandemic may be receding, but growth has not returned,” economist Mihir Swarup Sharma of the New Delhi-based Observer Research Foundation told AFP.

“Instead, imports as a proportion of GDP -- driven by higher prices for food, fuel, and other commodities -- are rising.”

“We don’t expect this outcome to materially disrupt the central bank’s policy normalisation plans. This subdued reading is likely to be followed by a strong double-digit growth in June’22 quarter on base effects,” said Radhika Rao, senior economist, DBS Bank, Singapore.

“While government expenditure expectedly provided support, domestic consumption remained quite muted with elevated inflation and the third wave of the pandemic taking its toll on discretionary demand,” said Kunal Kundu, India economist, Societe Generale, Bengaluru. “Worryingly, per capita real GDP recorded a contraction of 0.5% from its FY19 level. On the value-added front, manufacturing contracted as expected. Yet a stronger inventory buildup suggests weaker demand.”

“While the readings have broadly come in line with expectations, the outlook remains clouded with uncertainties especially with escalating crude oil prices. Further, weak labor markets, limited ability on additional fiscal spends, reduced corporate margins due to rising input prices