oppn parties Economic Growth: Uncertain Times

News Snippets

  • The Indian envoy in Bangladesh was summoned by the country's government over the breach in the Bangladesh mission in Agartala
  • Bank account to soon have 4 nominees each
  • TMC and SP stayed away from the INDIA bloc protest over the Adani issue in the Lok Sabha
  • Delhi HC stops the police from arresting Nadeem Khan over a viral video which the police claimed promoted 'enmity'. Court says 'India's harmony not so fragile'
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  • Sin goods like tobacco, cigarettes and soft drinks likely to face 35% GST in the post-compensation cess era
  • Bank credit growth slows to 11% (20.6% last year) with retail oans also showing a slowdown
  • Stock markets continue their winning streak on Tuesday: Sensex jumps 597 points to 80845 and Nifty gains 181 points to 24457
  • Asian junior hockey: Defending champions India enter the finals by beating Malaysia 3-1, to play Pakistan for the title
  • Chess World title match: Ding Liren salvages a sraw in the 7th game which he almost lost
  • Experts speculate whether Ding Liren wants the world title match against D Gukesh to go into tie-break after he let off Gukesh easily in the 5th game
  • Tata Memorial Hospital and AIIMS have severely criticized former cricketer and Congress leader Navjot Singh Sidhu for claiming that his wife fought back cancer with home remedies like haldi, garlic and neem. The hospitals warned the public for not going for such unproven remedies and not delaying treatment as it could prove fatal
  • 3 persons died and scores of policemen wer injured when a survey of a mosque in Sambhal near Bareilly in UP turned violent
  • Bangladesh to review power pacts with Indian companies, including those of the Adani group
Devendra Fadnavis to be the next chief minister of Maharashtra after Eknath Shinde agrees to join the government as deputy CM
oppn parties
Economic Growth: Uncertain Times

By Ashwini Agarwal
First publised on 2022-03-01 10:39:53

The National Statistical Office (NSO) has confirmed what was clearly visible on the ground. Economic growth has slowed down considerably and the Indian economy grew at just 5.4% in Q3, down from 8.5% achieved in Q2. Consequently, the estimate for the full year growth in FY22 has been revised to 8.9%, down from 9.2% projected earlier. Even this will be hard to achieve given the sluggish private consumption and global headwinds. These figures show that the growth in Q4 will slide below 5%. The figures are also much lower than RBI estimates in December which pegged full year growth at 9.5% and Q3 and Q4 at 6.6% and 6% respectively.

Sluggishness in manufacturing and construction pulled the economy back in Q3. While manufacturing added a value of just 0.2% in Q3, construction contracted by 2.8%. The services sector was steady but labour intensive sectors were still distressed and nowhere their pre-Covid levels in real terms. Private consumption, which grew at 7% in Q3, is likely to go down to just 1.5% in Q4. Gross fixed capital formation is also sluggish and points to the fact that there is not much activity in capacity expansion or starting new projects given the subdued demand.

Although the estimate of 8.9% will still make India the fastest growing major economy in the world, it is unlikely that the figure will be achieved. Already, crude prices have hit the roof and the pump prices will see a huge increase in India in the first week of March as soon as the election ends in UP. Analysts fear that the rise will be in the region of Rs 10 per litre over a short period and that would lead to inflationary pressures. It might also lead the RBI to raise interest rates and squeeze out extra cash from the financial markets. Add to this the problems exporters will face due to the Ukraine situation, the supply chain disruption, the payments problem (with Russia out of Swift system), high prices of almost all commodities leading to increased cost of inputs and volatility in financial markets and the scenario remains bleak.