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A person walks on the seafront as scattered clouds are seen over Mumbai’s skyline, India, June 10, 2015. REUTERS/Danish Siddiqui

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  • Financial system grows 5.4 y/y in Dec qtr vs 8.5% in Sept qtr
  • Manufacturing up 0.2% vs 5.6% in earlier quarter
  • Economists concern Ukraine disaster threatens development momentum

NEW DELHI, Feb 28 (Reuters) – India’s economic system misplaced momentum within the last quarter of 2021, with development slowing from earlier two quarters, information confirmed on Monday, as fears mount that hovering prices within the wake of Russia’s invasion of Ukraine will additional sap development.

Gross home product rose 5.4% year-on-year in October-December, official information confirmed, lower than 6% forecast by economists in a Reuters ballot, and beneath upwardly revised 8.5% development in July-September and 20.3% April-June enlargement.

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“The expansion quantity is basically disappointing,” mentioned Sujan Hajra, chief economist at Mumbai-based Anand Rathi Securities, citing weakening rural shopper demand and investments.

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India, which covers almost 80% of its oil wants by way of imports, probably faces a widening commerce deficit, a weaker rupee and better inflation after crude costs spiked above $100 a barrel, with successful to development seen as the principle concern.

“Given the geopolitical instability and crude oil costs, we expect the fiscal and financial coverage lodging will proceed,” Hajra mentioned.

A ten% rise in oil costs may shave 0.2 proportion factors off India’s GDP development whereas including 0.3 to 0.4 proportion factors to retail inflation, in keeping with Nomura’s estimates.

The Reserve Financial institution of India slashed its key repo charge by 115 foundation factors since March 2020 to melt the blow from the coronavirus pandemic and has saved charges low to help the financial restoration.

WEAKENING DEMAND

Nonetheless, that restoration, already sputtering amid weak shopper demand and personal funding, slowed additional when the third wave of coronavirus infections hit Asia’s third-largest economic system final month.

Progress in shopper spending, its fundamental driver, slowed to 7.0% from a yr earlier in October-December quarter from revised 10.2% in earlier quarter, Monday’s information confirmed.

Manufacturing slowed to 0.2% development from revised enlargement 5.6% enlargement within the earlier quarter whereas the development sector contracted 2.8% after 8.2% development within the earlier quarter.

The federal government additionally lower its development estimate for the 2021/22 fiscal yr ending on March 31 to eight.9% from 9.2% seen in January as COVID-19 associated curbs weighed on exercise early this yr.

Funding development slowed to simply 2.0% on yr in contrast with revised 14.6% enhance within the earlier quarter, with state spending slowing to three.4% development after a 9.3% rise in July-September.

Sakshi Gupta, senior economist at HDFC Financial institution, mentioned India was more likely to really feel the ripple results of widening sanctions in opposition to Russia.

“We see a draw back danger of 20-30 foundation factors to our base forecasts,” she mentioned. For now HDFC sees the economic system rising 8.2% within the subsequent fiscal yr.

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Aditional reporting by Anuron Kumar Mitra and Chandini Monnappa, Enhancing by Louise Heavens and Tomasz Janowski

Our Requirements: The Thomson Reuters Belief Rules.

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