The gross domestic product (GDP) data for the April-June 2022 quarter will be released by the government on Wednesday and as per economists, the Indian economy may have grown at the fastest pace in a year during the quarter, driven by a recovery in contact-intensive sectors, but on a low base.
Expecting a strong double-digit growth rate, the median prediction for India’s GDP growth was at 15.2%, with forecasts ranging between 10.5% and 17.8%, according to a Mint poll of economists. A Reuters poll also suggested that the India economy probably grew 15.2% higher during the first quarter of the current fiscal than a year earlier. This will be an improvement over the previous year’s figures, but sequentially the economy is expected to have seen a contraction of 8.3%. The GDP growth for the January-March period was up 4.1% on a year before.
Economists said private investment is yet to fully recover and rising interest rates led by monetary policy tightening may pose a challenge for additional investments in the manufacturing sector, while high inflation will keep corporate margins under pressure.
“We expect GDP to grow by 14.0%-14.5% y-o-y in Q1 FY23 backed by low base and strong domestic demand. A broad based pickup was observed across consumption, services industry and investment. We expect the private final consumption expenditure, a measure of demand and gross fixed capital formation, a measure of investment, to grow by 16% and 14%, respectively. However, net exports will be a drag due to high average crude price during Q1,” said Ritika Chhabra- Economist and Quant Analyst, Prabhudas Lilladher Pvt Ltd.
The last time India’s GDP achieved higher annual growth was in April-June 2021, when it was 20.1% higher than the pandemic-depressed level of a year before.
The Reserve Bank of India (RBI) has raised its benchmark repo rate by 140 basis points since May, including 50 basis points this month, while warning about the impact of a global slowdown on domestic growth prospects. Many economists expect another rate hike of about 50 basis points next month, followed by one more of 25 basis points thereafter.
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