The Indian economy is estimated to grow marginally slower in the current fiscal year that ends in March than forecasts showed earlier as the impact of the pandemic hurt expansion while rising inflationary pressures and the effects of the war in Ukraine are likely to hurt ongoing economic recovery in the months ahead.
The economy is estimated to grow by 8.9% in 2021-22, slower than the previous forecast of 9.2%. The economy had contracted by 6.6% in the previous year as the pandemic took a toll on growth. The 8.9% estimated growth for 2021-22 will help the country maintain its status as the fastest growing major economy in the world.
Growth in the three months to December slowed to 5.4% from 8.5% in the second quarter and 20.3% in the first quarter.
The NSO data showed that the economy slowed in the October-December quarter of 2021 as the base effect waned and the impact of the coronavirus-induced curbs weighed on expansion.
Slowing manufacturing and construction weighed on growth while the services sector, which accounts for over 50% of the country’s GDP remained steady.
Trade, hotels, transport, communication and services related to broadcasting were the only sectors which remained sluggish. According to SBI Research the third quarter absolute numbers of these sectors are still 95% lower than the pre-pandemic level (Q3 FY20).
“Private consumption is below the pre-pandemic level and this is largely because labour intensive sectors such as trading and construction have not recovered from the pandemic shock. The recovery in these sectors remains patchy,” said Soumya Kanti Ghosh, group chief economic adviser at State Bank of India.
HDFC Bank said that the performance of private consumption expenditure for the full year was a positive trend. Growth has been revised up to 7.6% in FY22 from the earlier advance estimate of 4.1%, signalling faster recovery in consumer spending than earlier anticipated.