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August 31, 2022
- *India's economy probably grew at its fastest pace in a year in June qtr*
- *Gross domestic product (GDP) in the three months to June 30 was probably 15.2% higher than a year earlier, a Reuters poll showed this week*
- India's economy probably achieved its fastest annual expansion in a year in the April-June quarter, economists said, expecting the pace to sharply slow this quarter and in the next two as higher interest rates hit economic activity.
- Gross domestic product (GDP) in the three months to June 30 was probably 15.2% higher than a year earlier, a Reuters poll showed this week. January-March GDP was up 4.1% on a year before.
- 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.
- Forecasts for the latest quarter ranged from 9.0% to 21.5%. The official release is due at 1200 GMT on Wednesday.
- 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.
- The latest Reuters poll showed the economists expected growth this quarter could slow sharply to an annual 6.2% before decelerating further to 4.5% in October-December.
- Many economists expect another rate hike of about 50 basis points next month, followed by one more of 25 basis points thereafter.
- Consumer spending, which accounts for nearly 55% of economic activity, has been hit hard following a rise in prices of food and fuel, though monthly inflation has moderated in the past three months.
- Sales of two-wheel vehicles are an indicator of the health of the economy. In April-June they were 5.03 million units, higher than in the same periods of 2021 and 2020 but nearly one-fifth lower than in 2019, industry data showed.
- Economists judge that such frequently available indicators show India's economy, Asia's third largest, is so far holding up well to worsening conditions.
- "More timely data suggest that resilience has continued in Q3 (July-September) too," said Shilan Shah, India economist at Capital Economics, Singapore, noting that the economy had better resisted the impact of the Omicron wave in January-March than it had coped with the previous wave of pandemic.
- But the economy faces downward risks, because companies' investment plans could be impacted by tighter monetary conditions and higher input costs, Shah wrote in a note to clients last week.
- A depreciation in the rupee of more than 7% against the dollar this year has made imported items costlier for consumers and businesses.
