NEW DELHI: According to a Reuters survey of experts, India's economic growth likely slowed down even more in the October-December quarter due to weaker demand and is expected to continue to deteriorate as a result of further interest rate hikes. The study also revealed that growth in the third-largest economy in Asia was predicted to decline even further, to 4.4 percent in the current quarter, and average 6.0 percent in 2023-2024, which is below the official government forecast of 6.5 percent released on January 31.
Nonetheless, every responder to the study expected growth to be less than it had been the previous quarter, with 75 percent of respondents expecting growth to be less than 5.0 percent.
According to HDFC Bank's head economist Sakshi Gupta, base effects are moderating and bringing down the annual statistics. "Agriculture support may be less, and manufacturing may be a burden." Exports and consumer demand on the demand side most certainly contributed to the decline, while investments remained stable, she added. "Interest rates are rising as inflation continues to be quite high. Pent-up demand has also begun to ease off," Gupta added.
In order to combat inflation, the Reserve Bank of India has increased interest rates by a total of 250 basis points since last May and is likely to do so once more in April. It is anticipated that these prior actions will have a delayed impact on consumption and economic expansion.
When major central banks continue to raise rates, external demand is also likely to weaken.
Upasana Chachra, chief economist for India at Morgan Stanley, said, "We expect growth for the domestic economy to hold up, but a greater-than-anticipated spillover impact from weak global conditions...may have more significant repercussions for local growth in the near term."
The Indian economy, which continues to be a relative "bright light" in the global economy, will provide alone 15 percent of the growth this year, according to IMF Managing Director Kristalina Georgieva.
India continues to be a bright spot at a time when the IMF expects this year to be challenging and global growth to drop from 3.4 percent in 2022 to 2.9 percent in 2023, she added.
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