India fiscal Q2 GDP growth slows to 6.3% on high inflation, weak exports

MUMBAI (ICIS)–India’s economic growth slowed down to a 6.3% in its fiscal second quarter ending September 2022, dragged down by contractions in the manufacturing and mining sectors amid high inflation and weak exports.

The figure was less than half the 13.5% growth posted in April-June 2022, which was aided by a low base in the previous corresponding period, when economic activity was severely dampened by the Delta wave of the coronavirus pandemic.

In the September quarter, the manufacturing sector has shrunk 4.3% year on year as profit margins of companies came under pressure due to rising input cost, according to the Ministry of Statistics and Programme Implementation (MoSPI).

For the fiscal year ending March 2023, India is expected to achieve a GDP growth of 6.8-7.0%, the country’s chief economic adviser V Anantha Nageswaran said following the release of the Q3 GDP data.

“In an uncertain external environment, domestic demand is expected to drive GDP growth,” he said, adding that festival sales, bank credit growth and auto sales data show that the Indian economy had maintained its momentum despite global headwinds.

The Reserve Bank of India (RBI) had pegged India’s growth rate for the second quarter at 6.1-6.3% in its November bulletin, but the pace would slow down to 4.6% in the third and fourth quarters.

For the full fiscal year ending March 2023, the central bank expects the Indian economy to post a 7.0% growth.

The slowdown in the global economy, the impact of the Russian attack on Ukraine, combined with domestic problems like rising interest rates and continued high inflation, weigh on the economy.

In October, the World Bank pared its growth estimate for India first the current fiscal year to 6.5% from 7.5%, while the International Monetary Fund (IMF) brought it down to 6.8% from 7.4%.

In November, US credit rating agency Moody’s Investors Service cut India’s economic growth forecast for 2022 to 7%, from 7.7%.

“The downward revision assumes higher inflation, high interest rates and slowing global growth will dampen economic momentum by more than we had previously expected,” the agency said in its Global Macro Outlook 2023-24.

India is scheduled to release its fiscal third-quarter GDP estimates on 28 February 2023.

Focus article by Priya Jestin

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