Moody’s Analytics said India’s main engine is the domestic economy, not trade. (File)
New Delhi:
Moody’s Analytics todayIt said India’s domestic economy, not trade, was its main engine of growth and that the slowdown in economic activity late last year would be temporary.
Government data released last week showed India’s gross domestic product (GDP) growth slowed to a lower three-quarters to 4.4 percent in October-December 2022, mainly due to a contraction in manufacturing and lower private consumption spending.
While manufacturing shrank by 1.1 percent, personal consumption expenditure slowed to 2.1 percent in the October-December quarter of the current fiscal year.
Growth slowed significantly from a year ago, with private consumption lagging behind overall GDP, Moody’s Analytics’ Emerging Markets Outlook report said, for the first time since the Covid-19 wave hit the economy in the second quarter of 2021.
“Our view is that the slowdown at the end of last year will be temporary and even beneficial, helping to take some of the demand-side pressure off without stalling the economy wholesale. Externally, good growth in the initial recovery of the US and Europe will propel India forward in the middle of the year,” he said. he is.
The US and Europe are India’s largest trading partners and are important destinations for the export of business services.
The slowdown in GDP growth in the December quarter was sharp compared to the 11.2 percent growth in the same quarter of the previous fiscal year.
In the current fiscal year, the economy grew by 13.2 percent in the April-June quarter and 6.3 percent in the July-September quarter.
Moody’s Analytics said unlike most other emerging Asian countries, India’s domestic economy is its main engine, not trade. “With this in mind, we remain cautious on India’s performance in the fourth quarter,” it said.
Sectors such as manufacturing and agriculture, which are closely linked to personal consumption spending, shrank or barely grew in the December quarter of the current fiscal year.
The normally fast-growing construction, retail and wholesale trade sectors overheated somewhat, though both lagged gains earlier this year.
“While high interest rates have slowed the domestic economy and curbed imports, external imbalances have widened, putting pressure on the rupee and fueling inflation,” Moody’s Analytics noted.
In the current fiscal (2022-23), GDP is projected to grow by 7 percent, according to official estimates. This calls for GDP expansion of about 5 percent in the fourth (January-March) quarter.
In 2021-22, the economy grew by 9.1 percent. In 2020-21 (the year affected by Covid), the economy shrank by 5.8 percent, and in 2019-20, growth was 3.9 percent.
(Except for the headline, this story was not edited by NDTV staff and was published on a syndicated channel.)
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