India's economy expands 5.4% y/y in Oct-Dec quarter

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BENGALURU, Feb 28 (Reuters) - India's economy lost momentum in the final quarter of 2021, with growth slowing from previous two quarters, data showed on Monday, as fears mount that soaring costs in the wake of Russia's invasion of Ukraine will further sap growth.

Gross domestic product rose 5.4% year-on-year in October-December, official data showed, slower than 6% forecast by economists in a Reuters poll, and far below upwardly revised 20.3% growth in the April-June quarter and 8.5% in July-September. read more

COMMENTARY

VIVEK KUMAR, ECONOMIST, QUANTECO RESEARCH, MUMBAI

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"India’s GDP growth decelerated to 5.4% YoY in Q3 FY22 from 8.5% in Q2. Of concern are the contraction in the construction sector and the sharp deceleration in manufacturing and investment activity. Sluggishness in momentum could spill over to Q4 due to temporary impact from Omicron-related disruption and minor adverse impact of Russia-Ukraine crisis via the trade channel. Some of these risks could get offset by back-loaded government spending and the persistence of accommodative monetary policy."

"Full-year growth projection for FY22 now stands revised lower to 8.9% from 9.5%, considering past revisions to FY21 data and incorporation of the recent loss of momentum in Q3. Going forward, we continue to expect GDP growth in FY23 to come in at 7.5%. While waning of statistical base effect will pull down the headline number, we believe the organic momentum is likely to be healthier."

GARIMA KAPOOR, ECONOMIST - INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

"India's GDP growth for Q3FY22 came in a tad below our expectation of 5.7% as the manufacturing sector recorded tepid growth amid unexpected de-growth in the construction sector. However, we have decisively moved above the pandemic slump with all sectors of the economy seeing a rebound."

"Going forward, growth in Q4FY22 will benefit from the unlock trade as most states have removed pandemic-related restrictions, but weak rural demand and geopolitical shock due to Russia-Ukraine war may disrupt global growth and supply chains. Impending pass-through of higher oil and gas prices may also act as a dampener for domestic demand sentiment."

SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM

"For FY23, we expect GDP growth at 8.2%, with downside risks emerging to our forecasts due to rising geopolitical tensions."

"If the sanctions on Russia become broader in nature (extending to the energy sector) and linger on beyond the near-term, we see risks to global growth and trade which are likely to have a ripple effect on India as well. We see a downside risk of 20-30 bps to our base forecasts."

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI

"India's real GDP growth at 5.4% in Q3 was primarily driven by strong growth in the services sector and a pick up in private final consumption spending. While growth in agriculture has slowed in Q3, it has become negative in the construction sector.

"On the positive side, the levels of real spending whether by the private sector or the government sector are higher than the pre-pandemic levels."

"Given the encouraging trends in government's revenues and spending until Jan 2022 and the upward revision in the nominal GDP growth rate for FY22, the fiscal deficit to GDP ratio for FY22 may come out to be better than what was projected by the (federal) budget."

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI

"The growth number is really disappointing. This is something the RBI (Reserve Bank of India) and Finance Ministry had anticipated. Therefore, both the fiscal and monetary policies have been more pro-growth despite concerns on the inflationary front."

"Given the geopolitical instability and crude oil prices, we think the fiscal and monetary policy accommodation will continue. Rural consumption and lack of growth from industries are the major concerns right now."

PRITHVIRAJ SRINIVAS, CHIEF ECONOMIST, AXIS CAPITAL, MUMBAI

"December-quarter GDP growth was broadly in line with our expectations. Apart from base effects, moderation in activity was driven by manufacturing led by capital goods industries and exports. There were signs of reversal in the month of December, but with Omicron and inflation impact from geopolitics, growth is likely to be weaker in the March quarter. Accommodative domestic financial conditions, continued fiscal support and vaccination progress should drive a gradual recovery."

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Reporting by Anuron Kumar Mitra, Rama Venkat, Nallur Sethuraman, Chandini Monnappa and Shivani Singh in Bengaluru; Editing by Aditya Soni

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