Business Maverick

Business Maverick

India’s Economy Lost Speed on Virus Curbs and War in Ukraine

Horses in Paharganj market in New Delhi, India, on Wednesday, May 11, 2022. India’s central bank will raise its inflation forecast in the June monetary policy meeting amid elevated commodity prices, possibly setting the stage for more interest rate increases by August, a person familiar with the matter said.

India’s economy grew slower than estimated last year, as virus curbs dragged activity while the war in Europe added a new inflation hurdle to recovery. 

Gross domestic product in the year to March 2022 grew 8.7%, according to data released by Statistics Ministry Tuesday. That’s in-line than the median estimate in a Bloomberg survey and slower than the 8.9% expansion projected by the Statistics Ministry three months ago.

In the January-March quarter, the economy expanded 4.1%, a performance that marks the low point of the year with officials holding out hope that a nascent recovery gathers pace in coming months.

“We expect rural demand to pick up in the coming months,” Chief Economic Advisor V. Anantha Nageswaran told reporters after the data was released. He added GDP growth should hold around 7% for the fiscal year to March 2023.

India's economy will grow at a slower pace than estimated earlier

Asia’s third largest economy had just begun recovering from the pandemic-induced slump when a surge in omicron cases in January brought back some of the virus-related restrictions. The war in Ukraine, in February, further added to its woes, pushing up commodity prices and squeezing supplies further.

INDIA REACT: GDP Holds Up Amid Challenges, But Slowdown Looms

Earlier this month, elevated prices forced India’s central bank to hike rates by 40 basis-points in an off-cycle meeting. Governor Shaktikanta Das, who is due to next review monetary policy June 8, has signaled more interest rate increases to tame inflation, a move that may hurt demand further.

“The fact remains that the economy has recovered from the pandemic shock and the monetary policy committee’s guarded optimism on growth is validated,” said Gaurav Kapur, chief economist at IndusInd Bank. “Inflation concerns will continue to drive the future actions.”

Here’s more from the GDP data-

  • Gross value added, a key input of GDP that strips out the impact of taxes on products, grew 3.9% in three months to March. Manufacturing output shrank 0.2% in January-March, while mining sector expanded 6.7%. Agriculture sector grew by 4.1%.
  • For the full fiscal year, agriculture output expanded 3%, manufacturing sector grew 9.9%, and mining output increased 11.5%
  • India’s budget deficit for last fiscal came at 6.7% of GDP, lower than the 6.9% goal, data released separately showed earlier today

Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

[%% img-description %%]

The Spy Bill: An autocratic roadmap to State Capture 2.0

Join Heidi Swart in conversation with Anton Harber and Marianne Merten as they discuss a concerning push to pass a controversial “Spy Bill” into law by May 2024. Tues 5 Dec at 12pm, live, online and free of charge.

A South African Hero: You

There’s a 99.8% chance that this isn’t for you. Only 0.2% of our readers have responded to this call for action.

Those 0.2% of our readers are our hidden heroes, who are fuelling our work and impacting the lives of every South African in doing so. They’re the people who contribute to keep Daily Maverick free for all, including you.

The equation is quite simple: the more members we have, the more reporting and investigations we can do, and the greater the impact on the country.

Be part of that 0.2%. Be a Maverick. Be a Maverick Insider.

Support Daily Maverick→
Payment options