Indian economic growth ‘below forecasts’
A POST-PANDEMIC rebound saw India’s economy grow 13.5 per cent in the June quarter, official figures showed last Wednesday (31), but the expansion was below forecasts thanks to the headwinds buffeting Asia’s third-largest economy.
Last week’s figure was the highest since the 20.1 per cent expansion recorded during the same period last year, at a time when business activity was recovering from government shutdown edicts.
But the result is well below the 16.2 per cent forecast by the Reserve Bank of India (RBI), the country’s central bank.
“The numbers are lower than we expected,” said State Bank of India chief economic advisor Soumya Kanti Ghosh.
He added the RBI would most likely revise down its 7.2 per cent growth forecast for the year to March 2023, with weakness in the manufacturing sector a cause for concern.
Elevated crude oil prices and a seven per cent fall in the rupee this year have left India battling
a deteriorating trade balance.
India’s merchandise trade deficit widened to a record $31 billion (£26.8bn) in July, compared to $10.6bn (£9.19bn) in the same month last year, provisional data showed.
India imports more than 80 per cent of its crude oil needs, and shocks to the market since Russia’s February invasion of Ukraine have left its 1.4 billion people struggling with higher fuel charges.
Consumer inflation has consistently overshot the RBI’s twoto-six per cent target range this year, hitting an eight-year high of 7.79 per cent in April before cooling to 6.71 per cent in July.
But Bank of Baroda chief economist Madan Sabnavis said household spending had remained resilient because of demand left over from the shock to the economy during the pandemic.
“Normally with high inflation, purchasing power comes down, but that doesn’t seem to have played out so far,” he said.
In August, India’s central bank hiked interest rates for the third time in four months, pushing borrowing costs up to prepandemic levels.