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MUMBAI: A post-pandemic rebound saw India’s economy grow 13.5 percent in the June quarter, official figures showed on Wednesday, but the expansion was below forecasts thanks to the headwinds buffeting Asia’s third-largest economy.
The increase from the same quarter last year reflects a dramatic uptick in activity since mid-2021, when the peak of the country’s most devastating coronavirus wave began to recede.
That outbreak saw thousands of people dying across India each day, overwhelming hospitals and crematoriums, and came after an extended lockdown that pummeled consumer spending and brought factories to a standstill.
Wednesday’s figure was the highest since the 20.1 percent expansion recorded during the same period last year, at a time when business activity was recovering from government shutdown edicts.
But the result is well below the 16.2 percent forecast by the Reserve Bank of India, the country’s central bank, with inflation and other indications of economic weakness dragging down performance.
“The numbers are lower than we expected,” State Bank of India chief economic adviser Soumya Kanti Ghosh told AFP.
He added that the RBI would most likely revise down its 7.2 percent growth forecast for the year to March 2023, with weakness in the manufacturing sector a cause for concern.
Elevated crude oil prices and a seven percent fall in the rupee this year have left India struggling with a deteriorating trade balance.
India’s merchandise trade deficit widened to a record $31 billion in July, compared to $10.6 billion in the same month last year, provisional data showed.
Import costs, led by petroleum products and coal, were more than twice as high as export revenues.
India imports more than 80 percent of its crude oil needs and shocks to the market since Russia’s invasion of Ukraine have left its 1.4 billion people struggling with higher fuel charges.
Consumer inflation has consistently overshot the central bank’s two-to-six percent target range this year, hitting an eight-year high of 7.79 percent in April before cooling to 6.71 percent in July.
But Bank of Baroda chief economist Madan Sabnavis said household spending had remained resilient because of pent-up demand left over from the shock to the economy during the pandemic.
“Normally with high inflation, purchasing power comes down, but that doesn’t seem to have played out so far,” he told AFP.
In August, India’s central bank hiked interest rates for the third time in four months, pushing borrowing costs up to pre-pandemic levels.
The International Monetary Fund last month slashed its growth outlook for India to 7.4 percent, a figure that still exceeds every other major economy besides Saudi Arabia.
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