30 August 2022, Mumbai
Economists polled by Reuters expect the growth pace of India’s economy to more than halve this quarter and slow further toward the end of the year as interest rates rise.
As per reports, growth this quarter is predicted to slow sharply to an annual 6.2 percent from a median forecast of 15.2 percent in Q2, supported mainly by statistical comparisons with a year ago rather than new momentum, before decelerating further to 4.5 percent in October-December
The median expectation for 2022 growth was 7.2 percent, according to an August 22-26 Reuters poll, but economists said that the solid growth rate masks how rapidly the economy was expected to slow in the coming months.
Kunal Kundu, India Economist, Societe Generale, says, domestic consumption will perhaps not be strong enough to drive growth further as unemployment remains high and real wages are at a record low level.
Meanwhile, the RBI, a relative laggard in the global tightening cycle, is set to raise its key repo rate by another 60 basis points by the end of March to try to bring inflation within the tolerance limit.
That follows three interest rate rises this year totalling 140 basis points and would take the repo rate to 6.00% by end-Q1 2023.
The economy is also enduring inflation pressure from a weak rupee, which for months has been trading close to 80 to the U.S. dollar, a level the central bank has been defending in currency markets by selling dollar reserves.
The latest Reuters poll also showed India's current account deficit swelling to 3.1 percent of gross domestic product this year, the highest in at least a decade, which may put further pressure on the currency.
Join our community on Linkedin