The Indian economy is facing a significant slowdown in growth, with economists predicting that the GDP growth rate in the January-March quarter of 2022 will be the slowest in a year. The country’s gross domestic product (GDP) unexpectedly grew by 8.4% in the previous quarter, thanks to a sharp drop in subsidies. However, most economists believe that this growth rate is unlikely to be repeated in the last quarter.
According to a Reuters poll of 54 economists, growth in Asia’s third-largest economy is expected to slow down to an annual rate of 6.7% in the first quarter of 2022, more in line with the long-term GDP growth rate. The slowdown is attributed to moderation in both the manufacturing and services sectors, as well as a muted contribution from agriculture. Economists in the poll forecast a GVA growth rate of 6.2% for the same period.
Weaker growth in private consumption, which accounts for 60% of GDP, is also likely to impact the upcoming quarters. Economic growth, which averaged 7.7% last fiscal year, is expected to slow down to 6.8% this fiscal year and further to 6.6% in the next fiscal year. This suggests that consistent 8% growth is still a distant target for the Indian economy.
While many economists believe that 8% or higher growth is necessary to generate enough job opportunities for the growing workforce in India, there are challenges in achieving this target. Some experts argue that a growth rate of 5-6% is more realistic for the Indian economy, given the current challenges and reforms needed.
There is a growing divergence between the GDP forecasts provided by financial economists and government estimates. The National Statistical Office (NSO) predicted a GDP growth rate of 5.9% in the January-March quarter, which is lower than the economists’ forecasts. This raises questions about how India measures its economic growth, especially considering the significant contribution of the informal sector to the country’s GDP and workforce.
The Indian economy is facing a slowdown in growth due to weak demand and moderation in key sectors. While economists remain cautiously optimistic about the future, there are challenges that need to be addressed to sustain higher growth rates in the long term. Reforms in various sectors, including agriculture and labor, are crucial to unlocking the full potential of the Indian economy and achieving consistent growth rates.