India's economic recovery slows amid growing external risks

[DELHI] India's economy is growing slower than previously forecast after the latest wave of coronavirus cases hampered activity and as risks mount from higher prices of commodities amid Russia's invasion of Ukraine.

Gross domestic product will expand 8.9 per cent in the year ending March 31, according to the data released by the Statistics Ministry Monday (Feb 28).

While that is the quickest pace among major economies, it is slower than the median 9.1 per cent expansion estimated in a Bloomberg survey of economists, and 9.2 per cent expansion projected by the government last month.

The loss of momentum comes amid disruptions from waves of virus outbreaks and lingering external risks, most notably from high commodity prices that are being exacerbated by the Russia-Ukraine crisis. A slower pace of expansion could hurt investment and job creation, testing fiscal and monetary policies that have remained loose despite rising inflation pressures.

Higher oil prices can worsen the outlook for inflation and impact disposable incomes in a nation where private consumption accounts for some 60 per cent of GDP. It can also widen the current-account gap and be a drag on the rupee, which last week was the second-worst performer among 11 Asian currencies tracked by Bloomberg.

Manufacturing output is seen increasing 10.5 per cent this fiscal year, while mining sector is expected to grow 12.6 per cent. Output from agriculture, a bright spot for the economy during the pandemic, is forecast to rise 3.3 per cent. Data also showed GDP in the three months to December grew 5.4 per cent, missing the estimate for a 5.9 per cent expansion. Gross value added, a key input of GDP that strips out the impact of taxes on products, rose 4.7 per cent versus 5.7 per cent estimate The quarterly estimates are for the period before the Omicron variant of the coronavirus began spreading, forcing many Indian states to impose curbs.

Prime Minister Narendra Modi's government last week flagged that the pandemic recovery will be challenged by geopolitical risks.

BLOOMBERG