India’s December quarter GDP growth stronger than data suggests – The Economist


MUMBAI (Reuters) – India’s apparent slowdown in GDP growth in the October-December quarter was largely due to revisions to historical data, economists said, with economic growth progressing as expected. and may not waver, he added. Central bank suspends rate hikes.

India’s GDP increased by 4.4% in October-December, down from 6.3% in July-September and below the 4.6% forecast in a Reuters poll.

The growth rate for 2021/22 has been raised to 9.1% from the previous 8.7% as part of a regularly revised schedule. Meanwhile, the contraction of GDP in 2020/21 has been revised to 5.7% from the previous estimate of 6.6%.

These adjustments raise the bar against which growth is measured in the October-December quarter.Without the correction, Q3 GDP growth would have been 5.1%

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HSBC Chief India Economist Pranjul Bhandari said the weaker-than-expected growth was due to an upward adjustment in GDP in the base year, with production levels continuing to improve compared to the pre-pandemic quarter. I added that there are

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Output levels at the end of December 2022 were 11.6% higher than in the pre-pandemic quarter of 2019, Bhandari said. This is an improvement from September, when production was 9.4% higher than the pre-pandemic quarter.

A Citibank India economist said the economy is following the trajectory seen in the pre-coronavirus quarters, and continued growth momentum is being maintained in the third quarter. rice field.

Samiran Chakraborty, chief economist for India at Citi, said in a report that continuous real GDP growth of 3.5% outperformed the 3.3% average in the third quarter prior to the pandemic.

“It reaffirms our view that growth momentum is close to pre-coronavirus levels,” Chakraborty said.

Economists at QuantEco Research say services are outstripping manufacturing activity, with investment leading consumption being the dominant narrative.

Some segments, notably private consumption and manufacturing, showed weakness even after considering the data revision.

Consumer spending grew only 2.1% year-on-year in the third quarter, a sharp drop from the 8.8% growth in the second quarter.

V. Anantha Nageswaran, India’s chief economic adviser, said private consumption growth would have been 6% without the correction.

Private consumption grew by 14.8% from December 2019 to 2022, compared with growth of 15.2% from September 2019 to 2022, HSBC’s Bhandari said.

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Among major sectors, manufacturing contracted 1.1% in the third quarter and 3.6% over the past three months. The sector grew by 3.8% in the third quarter, barring data revisions, he said, Nageswaran.

However, the weakness in manufacturing is also reflected in employment data. “GDP data reflects continued weakness in manufacturing activity and momentum in construction activity, in line with trends in employment data,” said Citi’s Chakraborty.

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Even though at least two members of India’s Monetary Policy Committee (MPC) have argued that the weakness in growth deserves a pause, most economists believe GDP data will push the central bank to close in April. We don’t see it holding us back from another 25 basis point rate hike.

Rahul Bajoria, chief India economist at Barclays, said GDP growth was broadly in line with the Reserve Bank of India’s forecast and unlikely to change significantly from the central bank’s forecast.

“Following a series of hawkish minutes and an inflation overshoot in January, we believe the balance of risks is tipping towards another rate hike. Opposition continues.”

Reported by Ira Dugal. Additional reporting by Aftab Ahmed. Edited by Dhanya Ann Thoppil

Our criteria: Thomson Reuters Trust Principles.

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