NEW DELHI: The momentum of GDP expansion in the months ahead would be tested by high inflation and the need to raise interest rates to combat price pressures.
India’s economy has scripted a robust recovery after the bruising impact of the pandemic, but in recent months it has faced several headwinds such as high inflation and is battling high food and fuel costs due to the impact of the war in Ukraine and the breakdown in supply chains which have also faced the brunt of the strict lockdowns in China to prevent the outbreak of the latest coronavirus variants.
India’s economy has scripted a robust recovery after the bruising impact of the pandemic, but in recent months it has faced several headwinds such as high inflation and is battling high food and fuel costs due to the impact of the war in Ukraine and the breakdown in supply chains which have also faced the brunt of the strict lockdowns in China to prevent the outbreak of the latest coronavirus variants.
Aditi Nayar, chief economist at ratings agency ICRA, said the slowdown seen in India’s GDP growth to a four-quarter low of 4. 1% in Q4 FY22 was inevitable, stemming from the adverse impact of the third wave on contact services, and of high commodity prices on margins, as well as the unfavourable base effect. She said the services sector was the main driver of the 3. 9% GVA (gross value added) growth in Q4 FY22.
The finance ministry said GDP growth in FY22 has recovered to cross pre-pandemic levels of FY20.
