The April-June quarter shows that the Indian economy is growing incredibly fast. Nevertheless, analysts expect things to slow down this quarter as increasing interest rates continue to pressure the economy.
India’s GDP for the last three months grew by 15%, a better performance than a year earlier. Similarly, the January to March GDP rallied by 4.1%, a sharp difference from last year’s figure.
The last time India’s GDP rose this much was in April-June 2021 when the figures came in at 20.1%, slightly higher than levels seen during the pandemic. While the official release is due today, experts predict that India’s GDP for the latest quarter will range between 9% to 21.5%.
The RBI has increased the repo rate by a whopping 140 basis points since May this year. And economists expect the institution to include another 50 basis points this month. The Reserve Bank of India believes the move will help the country manage the impact of the global slowdown, which is putting pressure on many economies.
A new Reuters poll suggests that India’s economy could slow significantly to an annual 6.2%. And if no concrete action is taken, things could decelerate further to 4.56% between October to December.
While the RBI is expected to increase interest rates by 50 basis points next month, analysts expect another 25 basis points hike from there.
The economy in focus
Rising prices of food and fuel, no thanks to inflation, have dramatically impacted consumer spending, which accounts for more than 55% of the country’s economic activity.
On the positive, sales of two-wheel vehicles have skyrocketed in the last couple of months. Stats show that the country sold 5.03 million units of two-wheel vehicles between April and June, slightly higher than sales made in 2021 and 2020.
Despite a faint global outlook, rising inflation, and ever-increasing interest rate, the country’s economy has performed well amid worsening conditions.
While the country’s economy continues to hold tight, the risks of downward pressure remain as companies may suffer from tighter monetary conditions and high output costs.