India's Economy Seen Losing Speed as Rising Rates Hurt Demand
For the fiscal year running from April 2022 to March 2023, economists predict growth of 6.9%, which is a touch lower than the previous government estimate of 7% and a tad higher than the 6.8% forecast of the International Monetary Fund.While rising rates hurt demand, India's economy is reportedly slowing down.
for the fiscal year running from April 2022 to March 2023, which is a tiny bit less than the previous government estimate of 7% and a tiny bit more than the IMF's forecast of 6.8%.
Shilan Shah, a senior economist at Capital Economics in Singapore, stated that there are indications that rising interest rates are having an impact on the actual economy. He cited declining passenger vehicle sales and sluggish retail sales as examples. This implies that consumption has somewhat weakened.
When borrowing prices rise, declining consumption, which makes up 60% of GDP, might harm growth in Asia's third-largest economy. In an effort to control inflation, the Reserve Bank of India has raised interest rates by 250 basis points since May. Notwithstanding rising dissension on the rate-setting panel, the bank has indicated it is not yet ready to halt.
In a recent interview, an external member of the RBI's Monetary Policy Committee, Jayanth Rama Varma, stated, "My concern is that all sources of demand in the economy are decreasing at the same time."
Rising borrowing prices, according to Varma, would hurt household budgets and, in turn, spending as exporters struggle with dwindling global demand and the government pushes on with fiscal austerity. According to Shashanka Bhide, another rate-setter, economic demand is what drives inflation.
What Bloomberg Economics Says...
What Bloomberg Economics Says...
Given the fragile state of the economy, we believe any further tightening would increase the dangers to growth.
— Senior economist for India, Abhishek Gupta
Further increases in interest rates and a slowdown in consumer spending in India's main export market, the US, might lead to more suffering.
As the global economy sputters, exports have slowed in the third quarter of 2018, according to Pranjul Bhandari, chief economist for India at HSBC Holdings Plc. She spoke to investment, a growing rural economy, and products outperforming services as examples of "pockets of resilience."
Because of this, India has managed to do rather well in a challenging climate where even China's signs hint at a patchy recovery despite its openness. The IMF predicts that in the fiscal year beginning in April, India's economy will grow at the quickest rate in the world.
Rahul Bajoria, an economist from Barclays Bank Plc, observed that "a solid domestic backdrop and steady improvement in services activity continued to support up India's economy."