The Indian economy likely grew at its slowest pace in at least a year, courtesy ripple effects of a war in West Asia and a statistical quirk called the deflator. But before you brace for gloom, it’s slowing less than feared.
A Mint poll of 21 economists sees India’s GDP growth rate anywhere between 6.8% and 8.0%—the median at 7.4%—in April-June, with nearly everyone betting on a dip compared to the previous quarter. The official stats land 31 August.
So what’s dragging things down? Industry stayed sturdy, services kept humming, but agriculture likely lagged as the monsoon arrived late. IDFC First Bank Ltd.’s Gaura Sengupta points to rising input costs squeezing margins, especially in petroleum and manufacturing, plus that deflator effect nudging things lower. Societe Generale SA’s Kunal Kundu adds that some of this slowing is just last year’s unusually weak base normalising.
Inflation tells its own story. Retail prices averaged 3.93% this quarter versus 2.89% a year ago, while wholesale inflation leapt to 9.37% from almost nothing. Higher inflation eats into real growth once you adjust nominal GDP for it.
Yet despite war-related disruptions, economic growth held up better than expected. ICICI Securities’s Abhishek Upadhyay says companies absorbed much of the shock themselves rather than passing it all to consumers, keeping demand, and sentiment, surprisingly upbeat. If the poll proves right, it’ll even beat the Reserve Bank of India’s 7.0% estimate for the quarter.
But don’t get too comfortable. CareEdge Ratings warns momentum could soften further in Q2 and Q3 as those external shocks work their way through the economy. The RBI has flagged energy prices, supply chains and trade uncertainty as key risks ahead, projecting 6.4% for Q2, 6.5% for Q3, and 6.8% for Q4, averaging 6.7% for the year. Read the full story by Manjul Paul.
India’s stock market fell on Wednesday, as losses in IT stocks and Reliance Industries Ltd. countered gains in heavyweight financials and optimism from a dip in oil prices. The decline deepened in the closing auction session, with the Nifty 50’s indicative close down by as much as 1.4%.
At the close, the Nifty 50 was 0.52% lower at 24,207.75 and the BSE Sensex 0.24% lower at 77,472.94. They were marginally down at 0.24% and 0.05%, ahead of CAS.
Ten of the 16 major sectors fell. IT stocks led losses with a 1.5% drop, with analysts attributing the slide to concerns over higher costs from US visa curbs and caution ahead of Nvidia Corp. earnings.
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SNEAK A PEEK
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