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India growth slows to 6.3% as pandemic bounceback wanes

This year India bounced back strongly from the coronavirus pandemic but it is now grappling with the same headwinds buffeting the global economy

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India’s growth slowed to 6.3 per cent in the September quarter, official figures showed Wednesday, with rising rates and higher consumer prices both dragging on Asia’s third-largest economy.

This year India bounced back strongly from the coronavirus pandemic but it is now grappling with the same headwinds buffeting the global economy.

The pace of expansion fell dramatically from 13.5 per cent year-on-year GDP growth in the previous quarter, a figure more illustrative of the shock to activity during the height of last year’s coronavirus wave.

India imports more than 80 per cent of its crude oil needs and rising petrol costs since Russia’s February invasion of Ukraine have hit the wallets of the country’s 1.4 billion people.

Consumer inflation has consistently overshot the central bank’s two-to-six per cent target range this year, hitting an eight-year high of 7.79 per cent in April.

Official data showed consumer inflation moderating slightly to 6.77 per cent in October after reaching a five-month high of 7.41 percent in September.

The Reserve Bank of India (RBI) in September raised interest rates for the fourth time in five months — up a total 190 basis points this year — with a further rate hike expected next week.

Merchandise exports hit a 20-month low of $29.78 billion in October, as high inflation and recession fears hit demand in key overseas markets.

Elevated crude oil prices and a falling rupee have left India struggling with a deteriorating trade balance as import costs rise.

The Indian rupee has hit record lows this year, plunging up to 10 per cent against the US dollar as the greenback rallied on risk-averse market sentiment. But India’s currency has proven more resilient than its Asian peers, aided by regular central bank intervention.

Analysts also say pent-up consumer demand and expectations of higher government expenditure will support growth in the face of headwinds.

“Several indicators suggest that the Indian economy is making resilient progress,” State Bank of India Chief Economic Adviser Soumya Kanti Ghosh said in a note.

“Growth impulses continue to be strong and it may be better to look through the GDP headline numbers for a couple of quarters before arriving at a definitive conclusion about the growth trajectory.”

The International Monetary Fund forecasts 6.1 per cent growth for India next year, down from 6.8 per cent in 2022 but still significantly higher than every other major economy.

India’s benchmark Sensex index closed 0.67 per cent higher in Mumbai ahead of the GDP data release. — AFP

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