Indian economic growth at one year low on inflation, Ukraine war | Business and Economy News
The short-term outlook for the economy has been clouded by a spike in retail inflation, which hit an eight-year high in April.
India’s economic growth slowed to a one-year low in the first three months of 2022, as weakening consumer demand amid rising prices could make the task of reining in inflation unscathed. damage to central bank growth becomes more difficult.
Gross domestic product rose 4.1 percent year-on-year from January to March, government data released Tuesday showed, matching economists’ forecasts of 4% in the past year. polled by Reuters, and growth was below 5.4% in October-December and growth of 8.4 percent in July-September.
The short-term outlook for the economy has darkened due to Retail inflation spikedhit an 8-year high of 7.8% in April. Energy and commodity prices soar partly caused by the Ukraine crisis are also tightening economic activity.
V Anantha Nageswaran, chief economic adviser to the Ministry of Finance, said after the release of the data, adding that the risk of stagnant inflation – a combination of slow growth and high inflation – was low in India. Degree.
Energy and food prices rise fell consumer spending, the economy’s main driver, which shrank 1.8% in the January-March period from a year earlier, compared with an upwardly revised growth figure. rose 7.4 percent last quarter, Tuesday’s data showed.
Garima Kapoor, an economist at Elara Capital, said slowing global growth, rising energy prices, a rate hike cycle and tightening financial conditions will all be key trends.
She revised her annual economic growth forecast for the current financial year beginning April 1 to 7.5 percent from a previous estimate of 7.8 percent.
The Government of India has revised its annual gross domestic product estimate for the financial year ending March 31, predicting growth of 8.7%, lower than the previous estimate of 8.9%.
The Reserve Bank of India (RBI) this month raised its benchmark yield by 40 basis points in an unscheduled meeting and its Monetary Policy Committee signaled it will raise rates more. to adjust the price.
Economists expect the MPC to raise the repo rate by 25-40 basis points next month.
Economists say weakening consumer demand and shrinking manufacturing activity are a concern.
High-frequency indicators suggest short supply and higher input prices are weighing on output in the mining, construction and manufacturing sectors – even as credit growth picks up and countries spend more.
Production output fell 0.2 percent year-on-year in the three months ended March, compared with a 0.3 percent gain in the previous quarter, while farm output growth accelerated to 4.1 percent. from a 2.5% increase in the previous quarter, the data showed.
The rupees of A more than 4% fall against the US dollar this year has also made imports more expensive, prompting the federal government to limit wheat and sugar exports, while cutting fuel taxes, joining the RBI in the fight against inflation.
Sakshi Gupta, chief economist at HDFC Bank, said: “With inflationary pressures mounting, the consumption recovery remains in a cloud of uncertainty for 2022-2023.