India's GDP Slows To 5.4% In December Quarter

India's economy expanded at slower pace of 5.4 per cent in October-December period compared with growth of 8.4 per cent in the previous quarter, government data showed.

 The gross domestic product (GDP) had expanded by 0.7 per cent in the corresponding period of 2020-21, according to the data released by the National Statistical Office (NSO)

The pace of growth of Indian economy slowed in October-December period on account of steadily rising retail inflation and rapidly slowing pace of industrial production.

The government in its second advanced estimate has lowered the economic growth forecast for the current financial year to 8.9 per cent from its earlier estimate of 9.2 per cent

The economy had grown by 20.3 per cent in the first quarter of this fiscal due to lower base effect. In the second quarter, the GDP grew by 8.5 per cent.

Nominal GDP or GDP at Current Prices in the year 2021-22 is estimated to attain a level of Rs 236.44 lakh crore, as against Rs 198.01 lakh crore in 2020-21, showing a growth rate of 19.4 per cent.

"The growth estimates for the full fiscal are broadly in line with expectations. However, to achieve 8.9% growth, the Q4 GDP has to grow by 4.8%. This looks challenging given the fact that the third wave of the pandemic had caused considerable restrictions," said Dr. M Govinda Rao, Chief Economic Adviser at Brickwork Ratings

"In addition, the ongoing geopolitical tensions, persistent supply bottlenecks, coal, power, and semiconductor shortages too have been pronounced. The effect of semiconductor shortages is already evident in the weak 0.2% growth in the manufacturing sector in Q3. The third wave was largely impacted the economic activities in the fourth quarter (Q4) we expect the full fiscal growth may undergo revisions. Finally, the higher crude oil prices are also likely to adversely impact both growth and inflation,” he added.

News agency Reuters in a poll had forecast the economy to expand at 6 per cent.

Consumer price index-based (CPI) inflation steadily rose from 4.48 per cent in October to 5.59 per cent in December while factory output, measured by index of industrial production, fell to 10-month low of 0.4 per cent in December from growth of 3.2 per cent in October.

The Reserve Bank of India has pegged India to grow at 9.2 per cent for current financial year.

Meanwhile, ratings agency Brickwork Ratings has revised the GDP growth projections for FY22 to 8.3% from the earlier forecast of 8.5% to 9%. After having witnessed 20.1% and 8.4% growth in Q1 and Q2 last financial year, respectively.