India 1Q22 GDP slowed to 1-year low

  • India’s economic growth slowed to the lowest in a year in 1Q22, hit by weakening consumer demand amid soaring prices that could make the central bank’s task of taming inflation without harming growth more difficult.
  • GDP grew 4.1% y/y in 1Q22, government data showed, in line with a 4% forecast by economists in a Reuters poll, and below 5.4% growth in 4Q21 and growth of 8.4% in 3Q21.
  • The economy’s near-term prospects have darkened due to a spike in retail inflation, which hit an eight-year high of 7.8% in Apr 22. The surge in energy and commodity prices caused partly by the Ukraine crisis is also squeezing economic activity.
  • “Inflation pressures will remain elevated,” V. Anantha Nageswaran, chief economic adviser at the finance ministry, said after the data release, adding that the risk of stagflation – combining slow growth and high inflation – was low in India.
  • Garima Kapoor, an economist at Elara Capital, said a slowdown in global growth, elevated energy prices, a cycle of rising interest rates and a tightening of financial conditions would all be key headwinds.
  • High-frequency indicators showed supply shortages and higher input prices were weighing on output in the mining, construction and manufacturing sectors, even as credit growth picks up and states spend more.

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