OPEC stated in its monthly update that India's real GDP advanced 6.3% y-o-y in 3Q22, well below the 13.5% y-o-y growth in 2Q22 as low base year distortions faded. In comparison to 2Q22, private spending growth slowed sharply to 9.7% from 25.9% y-o-y. While investment growth dropped half compared with 2Q22 growing at 10.4% y-o-y down from 20.1% y-o-y. Both exports and imports rose at a slower pace compared to the prior quarter. Export growth slowed to 11.5% y-o-y and imports to 25.4% y-o-y. Public expenditure shrank 4.4% y-o-y compared with 1.3% y-o-y in 2Q22. On the supply side, trade, hotels, transport and communication contributed significantly, growing by 14.7% y-o-y. On the other hand, both manufacturing and mining activities contracted by 4.3% and 2.8% y-o-y, respectively.
The recovery momentum supported by private consumption and investment growth might slow in the coming year due to high inflation, less accommodative monetary conditions and deteriorating external conditions. Household consumption may continue to grow, supported primarily by pent-up demand for high-contact activities. But consumers could turn more cautious amid the monetary policy transmission, which might elevate price pressure. India's 2022 and 2023 GDP growth forecasts remain unchanged from the previous assessment of 6.5% and 5.6%, respectively, considering the impact of higher inflationary pressures. Potential growth factors might materialize in the form of more fiscal support, while downward pressures could arise from COVID-19 or a further elevation in inflation rates.
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