Global credit rating agency Moody’s Analytics on Tuesday said that the slowdown in India’s economy late last year will be temporary and even salutary, reported news agency PTI. Moody’s Analytics also noted that the primary engine of growth for the country’s economy is the domestic economy, rather than trade, the report said.
In its report on emerging market outlook, Moody’s Analytics said growth slowed substantially on a year-ago basis, with private consumption lagging overall GDP for the first time since the Delta wave of Covid-19 struck the economy in the second quarter of 2021.
“Our take is that the slowdown late last year will be temporary and even salutary, helping to wring some of the demand-side pressures out of the economy without stopping it wholesale. On the external front, better growth in the US and Europe’s incipient recovery will propel India at the mid-year mark,” it said.
The official data released last week showed that India’s gross domestic product (GDP) growth slowed to a three-quarter low of 4.4 per cent in October-December 2022. This was mainly due to a contraction in manufacturing and low private consumption expenditure. The manufacturing sector contracted by 1.1 per cent, and private consumption expenditure slowed to 2.1 per cent in the October-December quarter of the current fiscal.
When compared to the 11.2 per cent rise during the same quarter of the previous fiscal year, the GDP growth slowdown in the December quarter was quite pronounced. The economy expanded by 13.2 per cent in the April–June quarter of the current fiscal year and 6.3 per cent in the July–September quarter.
Moody’s Analytics noted that in contrast to most other emerging-Asia economies India’s domestic economy, rather than trade, is its primary engine.
“With this in mind we observe India’s fourth-quarter performance with caution,” it said. “While high interest rates have slowed the domestic economy and curbed imports, external imbalances have widened, putting pressure on the rupee and adding to inflation,” Moody’s Analytics noted.
In the fiscal year 2022-23, the GDP is projected to grow by 7 per cent as per official estimates. This would require about a 5 per cent GDP expansion in the fourth quarter. In 2021-22 the economy grew 9.1 per cent. In 2020-2, the economy contracted by 5.8 per cent, while in 2019-20 the growth was 3.9 per cent.