India’s Q1 GDP Growth Slows From Previous 2 Quarters

India’s economic growth is likely to stumble again in the first quarter of this year due to Omicron-related restrictions and higher inflation, according to the reports. 

The reason behind this consecutive drop in the GDP is the surge in COVID-19 infection caused by the coronavirus variant – Omicron, which resulted in restrictions on the activity imposed by the state government, according to Rahul Bajoria, the Chief India Economist at Barclays. 

“While the movement restrictions were short-lived, other headwinds from global supply shortages and higher input costs also impeded the pace of expansions,” he added. 

The economy grew at 20.3%, 8.5%, and 5.4%, respectively, in the first three-quarters of FY21-22, which could be revised. 

According to a separate survey from other Reuters, the estimated growth for 2021-2022 is 8.7% lower than the official second, advanced estimate of 8.9% released on February 28. 

The Reserve bank of India, which has been focusing on growth for a long, only recently changed course and hiked its repo rate by 4.40% in an unscheduled meeting in May, with more hikes to follow in a bid to control price pressures. 

Economists strictly warned that inflation and high-interest rates could affect consumer spending, eventually impacting India’s consumer-driven economy. 

“The RBI will continue to highlight that overall recovery has been decent, but there are risks from elevated commodity prices and softer global growth going ahead”, said Dhiraj Nim, an economist at ANZ. “The impact of the higher interest rates due to high inflation is expected to be a net negative for growth”, he added. 

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