© Reuters. FILE PHOTO: Workers sit on a cart at a wholesale market in the old quarters of Delhi, India December 7, 2022. REUTERS/Anushree Fadnavis
By Madhumita Gokhale and Sujith Pai
BENGALURU (Reuters) – India’s economic growth likely slowed further in the October-December quarter amid weaker demand and is likely to lose further momentum as a series of rate hikes interest rates are weighing on activity, according to a Reuters poll of economists.
Gross domestic product (GDP) growth in the last quarter slipped to 4.6% a year, according to median forecasts from 42 economists in the Feb. 10-24 survey.
The economy had grown by 13.5% in April-June – spurred in large part by statistical distortions linked to the pandemic – before moderating to 6.3% in July-September.
The monthly survey also showed that growth in Asia’s third-largest economy is expected to slow further to 4.4% in the current quarter, and over 2023/24 would average 6.0%, lower than official estimate of 6.5% published on January 31.
Forecasts for October-December data, due Feb. 28, ranged widely, from 4.0% to 5.8%. However, all survey respondents expected growth to be lower than the previous quarter and three-quarters of respondents expected growth below 5.0%.
“There are base effects that are normalizing and pushing the annual numbers down. Support from agriculture could be weaker and manufacturing could also be a drag,” said Sakshi Gupta, senior economist at HDFC Bank.
She added that on the demand side, exports and consumer demand likely contributed to the slowdown, while investment remained flat.
“Inflation continues to remain very high and interest rates are rising. Pent-up demand has also started to moderate,” Gupta said.
The Reserve Bank of India has raised interest rates by a total of 250 basis points since last May to fight inflation, and is expected to do so again in April. These past movements are expected to have a lagged effect on consumption and economic growth.
External demand is also expected to moderate as the world’s major central banks continue to raise rates.
“We expect growth in the domestic economy to hold up, but a larger-than-expected ripple effect from weak global conditions…could have more pronounced implications for near-term domestic growth.” , noted Upasana Chachra, chief economist for India at Morgan Stanley (NYSE:).