India’s Q4 GDP report card may show growth deceleration; omicron, Russia-Ukraine war to blame

India’s fiscal fourth quarter GDP data due later today may show that the growth in economic activity may have slowed during January-March, primarily due to the omicron variant, experts say. Business activities in some parts of the country were temporarily halted during the period due to restrictions imposed by various state governments. Additionally, rise in crude oil prices from February end, due to the war in Ukraine, could have also impacted growth in the January-March quarter, they added. India’s GDP growth is forecast to be in the bracket of about 2.7% to 4% in the Q4 2022. The government is scheduled to release GDP figures for the last quarter of the fiscal 2022 at 5 pm on Tuesday.

In terms of sectors, growth in mining, manufacturing, industry and contact-intensive sectors moderated in Q4 due to supply chain crunch and rising prices of input goods, economists and experts said. Agriculture sector, which employs the largest number of people, also slowed down as prices of raw materials such as fertilisers rose and movement of people back to the urban centres increased after the reopening of the economy. Asia’s third largest economy grew at 20.3%, 8.5% and 5.4% respectively in the first three quarters of the fiscal year 2022. According to a Reuters poll of economists, growth in the fourth quarter of the previous fiscal year is expected to be the slowest in a year at 4%.

SBI Research: Q4 GDP growth seen at 2.7% amid clouds of ‘uncertainties’

“We are projecting GDP growth for FY 2022 at 8.5% and Q4 FY 2022 at 2.7%. We however believe the GDP projection for Q4 FY22 is clouded by significant uncertainties. For example, even a 1% downward revision in Q1 GDP estimates of FY 2022 from 20.3%, all other things remaining unchanged could push Q4 GDP growth to 3.8%,” SBI Research said.

“Economic activity, which gained strength in Q2 FY 2022 with the ebbing of the second wave, has lost pace since Q3, exacerbated by the spread of the Omicron variant in Q4. The beneficial effects of the rapid ebb of infections have, however, been overwhelmed by the geopolitical conflagration since Feb’22. CPI inflation edged above the upper tolerance band as unfavourable base effects combine with the onset of supply shocks as conflict escalates,” the report, authored by SBI Chief Economic Advisor Soumya Kanti Ghosh, said.

Barclays: Omicron could have impacted Q4 GDP growth; 3.7% growth forecasted

Barclays forecast India’s economic growth slowed to 3.7% year-on-year in the January to March quarter ie Q4 of FY 2022. The robust sequential recovery in place since last year (second quarter of calendar year 2021) likely eased in January-March quarter amid the surge in omicron infections and temporary activity restrictions imposed by various state governments, Barclays said in a report. 

“While the movement restrictions were short-lived, other headwinds from global supply shortages and higher input costs also impeded the pace of expansion. Still, as the economy reopened post the Omicron restrictions, the activity revival is becoming more broad based, which we think will lift GDP above pre-pandemic levels,” Barclays added. Barclays said weakness in the rural economy persisted in the Jan-March quarter as workers started moving from rural areas to urban centres for employment, and higher input costs weighed on both farming and non-farming activity. It expects agriculture growth to slip to 2.5% in the quarter.

ICICI Bank: Mining, manufacturing activity moderated in Q4; growth seen at 3.5%

According to a research report by ICICI Bank, it expects GDP growth in Q4 at 3.5% on the back of the impact of the omicron variant during the quarter as well as rising oil prices due to the Russia-Ukraine war. “Our research shows that an increase of USD 10/bbl in oil prices leads to a reduction of 20bps in GDP growth,” HDFC Bank said in a research report last week.

Mining, industry and contact intensive services sectors continued to see moderation in growth during the quarter. Manufacturing output too increased at a softer pace of 0.9% in Q4 from 1.4% during Q3. While, the contact intensive services sector too will continue to see moderation in growth,” the report added. In terms of acceleration in growth, financial services, public administration and defense gained in Q4. “Credit growth has been inching up led by agri, personal loans, MSME segment and services. Even life and non-life insurance has seen a pick-up in Q4,” the report said.

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