India’s economy grows 6.1% in March quarter, topping forecasts
INDIA’S economic growth accelerated to 6.1 per cent in the March quarter from a year earlier, boosted by government capital expenditure even as private consumption remained sluggish.
Government data released on Wednesday (May 31) showed that Asia’s third-largest economy expanded faster in the last quarter of the fiscal year 2022/23 ending in March than the forecast of 5 per cent by economists in a Reuters poll. It also exceeded the revised 4.5 per cent growth in the previous quarter, the data showed.
The full-year growth estimate was revised to 7.2 per cent, above an earlier estimate of 7 per cent. India’s economy grew 9.1 per cent in 2021/22.
Wednesday’s reading showed that India remains one of the fastest-growing emerging economies, especially with China’s recovery stumbling. Economists, however, warned that the global slowdown and volatility in financial markets pose a risk to exports and the growth outlook in coming quarters.
“The growth outlook is (not) without risks – particularly in regard to the monsoon progress and recession risks globally,” said Sakshi Gupta, an economist at HDFC bank. She added that growth numbers, however, reflected optimism for the Indian economy despite global headwinds.
The Reserve Bank of India (RBI) has raised its benchmark repo rate by 250 basis points (bps) since May last year. Economists expect it will leave the rate unchanged for the rest of 2023 as it waits to see the economic impact of earlier hikes.
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The manufacturing sector, which for the past decade has accounted for just 17 per cent of the economy, expanded 4.5 per cent year on year in the March quarter, compared to a 1.1 per cent contraction in the previous quarter.
India’s goods and services exports, accounting for about 22 per cent of gross domestic product (GDP), rose 13.8 per cent in 2022/23 to US$770 billion amid a gloomy global environment while imports rose 17.4 per cent to US$892 billion.
Forecasts for normal monsoon season rains in the next four months could support the farm sector, which grew 5.5 per cent year on year in the March quarter compared to 3.7 per cent in the previous quarter.
Uneven recovery
Private consumption, which accounts for nearly 60 per cent of the economy, grew 2.8 per cent on-year compared to 2.1 per cent in the previous quarter. Capital formation, an indicator of investment, rose 8.9 per cent on-year from a downward revised 8 per cent in the previous quarter.
Federal government spending, constituting about 10 per cent of GDP, rose 2.3 per cent year on year, compared to a revised 0.6 per cent contraction in the previous quarter. Prime Minister Narendra Modi, who remains popular after nine years in power, has stepped up capital spending in the past few years to build roads, railways and new airports to revive the economy after the pandemic.
Economists said the world’s most-populous country needs to grow 7 per cent to 8 per cent a year and build a strong manufacturing base to create jobs for millions of workers. Currently, 45 per cent of India’s workforce is employed in the farm sector, which contributes just 15 per cent to the economy.
The lack of well-paying jobs remains a major issue among India’s youth, as reflected in the unemployment rate rising to 8.11 per cent in April, even as more people joined the workforce, according to Mumbai-based think tank Centre for Monitoring Indian Economy.
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