 "Indian economy")
The Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) has slashed its projections on economic growth for the third and the fourth quarters of the current fiscal year (2021-22, or FY22), albeit mildly, due to volatility in commodity prices and financial markets, persisting global supply disruptions, and Omicron.
However, higher-than-expected gross domestic product (GDP) growth rate in the second quarter (Q2) of the year prompted the MPC to retain economic growth at 9.5 per cent for FY22.
The committee now pegged economic growth at 6.6 per cent for the third quarter (Q3) of the year, down from its earlier projection of 6.8 per cent and 6 per cent for the fourth quarter (Q4) — lower than its earlier forecast of 6.1 per cent.
The economy grew 8.4 per cent in Q2, higher than the MPC’s expectations of 7.9 per cent.
The cut in the projections came even as the government recently said the economy is showing strong signs of recovery from the devastation caused by the Covid-19 pandemic, with an upswing being reported in 19 of the 22 economic indicators, compared to pre-Covid levels.
It said the latest levels of these 19 indicators in the months of September, October, and November this year are higher than their pre-pandemic levels in the corresponding months of 2019. These indicators included electronic toll collection, which, at Rs 108.2 crore in October, was 157 per cent of pre-Covid levels of 2019.
Unified Payments Interface volumes are nearly 4x at 4.22 billion. Other indicators included merchandise imports, e-way bills, coal and cement production, rail freight traffic, fertiliser and tractor sales, power and fuel consumption, port cargo traffic, air cargo, Index of Industrial Production, and core sector output.
Unified Payments Interface volumes are nearly 4x at 4.22 billion. Other indicators included merchandise imports, e-way bills, coal and cement production, rail freight traffic, fertiliser and tractor sales, power and fuel consumption, port cargo traffic, air cargo, Index of Industrial Production, and core sector output.
However, RBI Governor Shaktikanta Das stressed that recovery — interrupted by the second wave of the pandemic — is gaining traction again, but is not strong enough to be self-sustaining and durable. According to Das, incoming information indicates that consumption demand has been improving, with pent-up demand getting reinforced by the festival season.
Rural demand is exhibiting resilience and farm employment picking up with robust performance by agriculture and allied activities. The recent reductions in excise duty and state value-added tax on petrol and diesel should support consumption demand by increasing purchasing power, said Das.
ICRA Chief Economist Aditi Nayar said the MPC has pared its growth expectations for Q3 and Q4, despite larger-than-expected net cash outgo in the government’s second supplementary demand for grants, suggesting a higher-than-forecast growth outcome in Q2 benefited from an upfronting of pent-up demand.
While a note of optimism was struck on domestic recovery gaining traction, it was highlighted that the Indian economy is not immune to either global spillovers or fresh Covid waves, she said.
