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India’s GDP growth slows in Oct-Dec quarter

The loss is being attributed to pent up demand due to high inflation and interest rates and contraction in manufacturing sectors.

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India’s GDP growth slowed to 4.4 per cent in the third quarter of this financial year (October-December),the slowest pace it has been since the first quarter of Jan-March 2022. If services such as Tourism, transport and communications registered a strong growth, manufacturing contracted 1.1 per cent in Q3. It has also been pointed out that the slowing growth in Q3 is not only the second consecutive quarter (with Q2 showing 6.3 per cent) but also of a low base in Q3( 5.4 per cent) of last year.

The dip in the GDP growth rate last quarter is only seen as being within expected prediction patterns by private experts and government agencies that saw growth as “distinctly uneven” with some sectors like agriculture on the higher end of things.

“The loss in growth momentum is due to fading away of favorable base effect, slowdown in pent up demand due to high inflation & interest rates and contraction in manufacturing sectors. Some of the high frequency indicators were already pointing at muted growth for the quarter vs Q2, hence, lower GDP growth rate in Q3 didn't come as a surprise”, Ritika Chhabra, Quant Macro Strategist at Prabhudas Lilladher PMS, has been quoted in a media report.

"The Q3FY23 GDP at 4.4% is very much on the expected lines. The growth rate has slowed down due to higher inflation and lower consumption. The data looks optically lower but the fact it is coming on a revised higher base than last year is encouraging. Low private consumption has been primarily responsible for the lower GDP print coupled with lower government spending and a contraction in manufacturing. Construction, Realty & Finance, trade, and hotel components provided support to the data”, Nish Bhatt, Founder and CEO at Millwood Kane International, has said.

The World Economic Outlook of the International Monetary Fund has projected global growth to fall from an estimated 3.4 per cent in 2022 to 2.9 per cent in 2023 and rising to 3.1 per cent in 2024. “Our growth projections actually for India are unchanged from our October Outlook. We have 6.8% growth for this current fiscal year, which runs until March, and then we're expecting some slowdown to 6.1% in fiscal year 2023. And that is largely driven by external factors,” Pierre-Olivier Gourinchas, Chief Economist and Director, Research Department of the IMF had said.

Recently in an interview, the Managing Director of IMF Kristalina Georgiva maintained that India continues to be a relative “bright spot” in the world economy alone contributing to 15 per cent of global growth in 2023.