Growth slowed to 3.9% in March quarter, poll shows

India’s economic growth likely slowed to a one-year low of 3.9% in the quarter ended March, from 5.4% in the previous three months, a Mint poll of 21 showed. economists ahead of the official data release next Tuesday. The third wave of covid-19 led by the Omicron variant is largely responsible for the slow economic recovery.

While the brakes on mobility were brief during the third wave, other factors such as global supply shortages due to the war in Ukraine and rising input costs further slowed the rate of expansion. .

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The median GDP growth forecast was 3.9%. This translates to growth of 8.7% for the full fiscal year 2021-22, the highest rate in five years, inflated by a sharp base effect.

“GDP growth (during the March quarter) likely slipped due to higher commodity prices on margins, lower wheat yields and the backlash from the recovery of contact-sensitive services attributable to the third wave, as well as a high base,” said Aditi Nayar, chief economist at ICRA Ratings, adding that agriculture and industry are expected to show a growth rate of less than 1% in gross value added, while growth in services would be around 5.4%.

Growth has been hit since the pandemic hit two years ago, slowing an already sluggish Indian economy. Additionally, Russia’s invasion of Ukraine and the slowdown in the global economy had a significant impact on India’s economic growth. The International Monetary Fund (IMF) has cut India’s economic growth projection for FY23 to 8.2% from 9% forecast in January, citing the impact of war on prices and disruptions in the Supply Chain.

Since more than 80% of India’s fuel needs are imported, the country has had to bear the brunt of oil prices remaining in the triple digits since the start of the war. Last week the government reduced the excise duty on gasoline from 8 per liter and on diesel per 6 per liter to cushion the blow to consumers battered by high fuel prices.

The cuts, which have been supplemented by tax cuts by some states, will help boost sentiment and improve consumers’ disposable income, Nayar added.

“We believe the high level of inflation could force RBI to focus on tackling price pressures, instead of supporting growth. We expect RBI to embark on a rate hike cycle early in the year. period, reversing the extraordinary policy of accommodation provided since March 2020,” said Rahul Bajoria, chief economist at Barclays.

RBI forecast economic growth of 16.2% for the current quarter, with base effects accounting for much of the increase.

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