Expressing confidence about India’s growth prospects, Moody’s Analytics on Tuesday said the country will regain its growth momentum and the slowdown in GDP growth late last year would be temporary.
“Our take is that the slowdown late last year will be temporary and even salutary, helping to wring some of the demand-side pressures out of the economy without stopping it wholesale,” Moody’s Analytics said in its Emerging Markets Outlook.
On the external front, better growth in the US and Europe’s incipient recovery will propel India at the midyear mark, it further said, adding that the US and Europe are India’s largest trade partners and are important destinations for exports of business services.
Data released by the National Statistical Office on February 28 revealed that GDP growth is estimated to have slowed down to 4.4% in the October to December 2022 quarter from 6.3% growth in the second quarter and 13.2% in the first quarter of the fiscal. The subdued growth in private consumption and contraction in manufacturing by 1.1% in the quarter has been a concern. The NSO has retained the growth forecast at 7% for the current fiscal but GDP growth is expected to slow down to 6% or even less in 2023-24.
Moody’s Analytics noted that India’s domestic economy, rather than trade, is its primary engine, in contrast to most other emerging-Asia economies. “With this in mind we observe India’s fourth-quarter performance with caution,” it said.
Growth slowed substantially on a year-ago basis, with private consumption lagging overall GDP for the first time since the Delta wave struck the economy in the second quarter of 2021, it further said.
Sectors such as manufacturing and agriculture that are highly linked to private consumption spending either contracted or barely grew, the report said. “The normally faster-growing construction and retail and wholesale trade sectors came in somewhat hotter, though both lagged gains from earlier this year,” it said, adding that while high interest rates have slowed the domestic economy and curbed imports, external imbalances have widened, putting pressure on the rupee and adding to inflation.
Official data on industrial output for January and retail inflation for February will be released in the next few days and will give more clarity on the growth prospects for the fourth quarter of the fiscal.
