Indian economy grows 13.5% on virus rebound
MUMBAI, India – A post-pandemic rebound saw India’s economy grow 13.5% in the June quarter, official figures showed on Wednesday, but the expansion was lower than expected due to headwinds that shook up Asia’s third-largest economy.
The increase from the same quarter last year reflects a dramatic increase in activity since mid-2021, when the peak of the country’s most devastating coronavirus wave began to recede.
The outbreak has seen thousands of people die every day across India, overwhelming hospitals and crematoriums, and came after a prolonged lockdown that sent consumer spending plummeting and factories crippled.
Wednesday’s figure was the highest since the 20.1% expansion recorded in the same period last year, at a time when business activity was recovering from government shutdown decrees.
But the result was well below the 16.2% forecast by the Reserve Bank of India (RBI), the country’s central bank, with inflation and other signs of economic weakness weighing on performance.
“The numbers are lower than we expected,” State Bank of India chief economic adviser Soumya Kanti Ghosh told AFP.
He added that the RBI would most likely revise down its growth forecast of 7.2% for the year to March 2023, with weakness in the manufacturing sector a cause for concern.
High crude oil prices and a 7% fall in the rupee this year have left India struggling with a deteriorating trade balance.
India’s merchandise trade deficit widened to a record $31 billion in July from $10.6 billion in the same month last year, according to provisional data.
Import costs, dominated by petroleum products and coal, were more than twice as high as export earnings.
India imports more than 80% of its crude oil needs and market shocks since Russia’s invasion of Ukraine have left its 1.4 billion people struggling with higher fuel costs .
Consumer inflation has consistently exceeded the central bank’s target range of 2-6% this year, hitting an eight-year high of 7.79% in April before falling back to 6.71% in July.
But Bank of Baroda chief economist Madan Sabnavis said household spending remained resilient due to pent-up demand left behind by the economic shock during the pandemic.
“Normally with high inflation purchasing power goes down, but that doesn’t seem to have played out so far,” he told AFP.
In August, India’s central bank raised interest rates for the third time in four months, pushing borrowing costs back to pre-pandemic levels.
The International Monetary Fund last month slashed its growth outlook for India to 7.4%, a figure that still outpaces all other major economies outside Saudi Arabia.