India growth slows, govt cuts forecasts

Economy slows down in face of higher oil prices, geopolitical tensions

Afp March 01, 2022
Uttar Pradesh has struggled through India's economic downturn, and Modi's Bharatiya Janata Party (BJP) is keen to prove it still holds sway in the bellwether state. PHOTO: AFP


India’s growth rate slowed further in the last three months of 2021, the National Statistics Office (NSO) said on Monday as it cut its forecast for the current financial year in the face of higher oil prices and geopolitical tensions.

Asia’s third-largest economy grew 5.4% year-on-year in the October to December period, NSO data showed.

That was a slowdown from a record 20.1% and 8.4% growth in the previous two quarters as a pandemic-induced favourable base effect waned.

The figure was “sorely below our expectations” of 6.2%, Aditi Nayar, chief economist of credit ratings agency ICRA, told AFP.

NSO also lowered its growth estimates for the ongoing financial year from 9.2% to 8.9%.

But Nayar said the forecast looked “rather optimistic” given rising commodity prices and an even larger base effect.

Covid pummelled Asia’s third-largest economy, which suffered its worst recession since independence in 1947 after a drastic lockdown brought factories and consumer spending to a standstill.

But it has since surged to become the world’s fastest-growing major economy, with widespread vaccine coverage and a milder-than-expected third wave of infections keeping it on track to retain the number one ranking.

Last week credit rating agency Moody’s forecast 9.5% GDP growth in 2022 on a stronger-than-expected economic recovery, a sharp upward revision from 7% projected earlier.

“The speed of the recovery from the first lockdown-led contraction in Q2 2020, and subsequently in Q2 2021 during the Delta wave, was stronger than expected, and the economy is estimated to have surpassed the pre-Covid level of GDP by more than 5% in the last quarter of 2021,” Moody’s said in its report.

“However, high oil prices and supply distortions remain a drag on growth,” Moody’s added.

Brent crude oil prices surged to their highest since 2014 to cross $105 a barrel last week in response to the Russia-Ukraine conflict.

Published in The Express Tribune, March 1st, 2022.

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