INSTANT VIEW - India's economy grows 13.5% y/y in April-June qtr

Credit: REUTERS/Anushree Fadnavis

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BENGALURU, Aug 31 (Reuters) - India's economy grew 13.5% year-on-year in the April-June quarter, the fastest pace in a year, official data on Wednesday showed amid fears of growth sharply slowing this quarter and the next two as higher interest rates hit activity.

Economists in a Reuters poll had forecast gross domestic product in Asia's third-largest economy would grow 15.2% year-on-year in the April-June quarter, compared with 4.1% in the previous quarter.



"The strong June-quarter real GDP growth print of 13.5% (albeit slightly lower than our expectation of 15.0%) is essentially a reflection of a rather low statistical base effect and also a reflection of pent-up demand following the exit from the Omicron wave during the March quarter."

"What is also clear is a distinctive shift in demand toward services, particularly for contact intensive services. However, we are seeing signs of waning of the intensity of tailwind generated by economic reopening."

"India's economic recovery process will likely continue to be weighed-in by rather weak labour market recovery and quite benign wage outlook hinting at weak domestic consumption outlook."

"This would mean that while we are convinced pace of easing of inflation would be slow, RBI is not far away from the end of its current rate hike cycle. Rather than staying on course until inflation comes down to the median target of 4.0%, RBI would stop hikes by end of 2022 even if the real policy rate remains negative once they are convinced of decelerating price pressure."

"For FY23, we expect the real GDP to grow by 7.1% y/y, though a lower print would not surprise us."

(Reporting by Chris Thomas in Bengaluru; Editing by Krishna Chandra Eluri)


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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