scorecardresearchIndia's GDP might have lost steam on Covid curbs before war: Report

India's GDP might have lost steam on Covid curbs before war: Report

Updated: 31 May 2022, 10:34 AM IST
TL;DR.
  • Russia’s invasion of Ukraine, and the flurry of punitive sanctions imposed on the former by the US and European nations, have the potential to impact India Inc.
Many rating agencies have trimmed India's growth forecast for FY22 and FY23 owing to soaring inflation and falling demand. REUTERS/Adnan Abidi

Many rating agencies have trimmed India's growth forecast for FY22 and FY23 owing to soaring inflation and falling demand. REUTERS/Adnan Abidi

India's economic growth may have lost some steam due to curbs triggered by the spread of Covid-19 while the Ukraine war has added a new challenge to the recovery, said a Bloomberg report.

"India’s economy probably grew slower than previously estimated last year, with virus curbs in the final quarter seen as a drag on activity while the war in Europe has added a new inflation hurdle to recovery," said the Bloomberg report, published by Mint.

India's Q4FY22 GDP numbers are expected on May 31.

The data is likely to show the gross domestic product (GDP) in the year to March 2022 grew 8.7 percent from a year ago, according to the median estimate in a Bloomberg survey. That’s slower than the 8.9 percent expansion projected by the Statistics Ministry three months ago. In the January-March quarter, the economy likely expanded 3.9 percent, according to the survey, a performance that will mark the low point of the year, said the Bloomberg report.

On the other hand, a Reuters poll showed last week that India's economy probably grew 4 percent in the January-March quarter from a year earlier. That would be the slowest pace in a year, following 5.4 percent growth in the previous quarter.

Russia’s invasion of Ukraine, and the flurry of punitive sanctions imposed on the former by the US and European nations, have the potential to impact India Inc.

The resultant spike in commodity prices, if not passed on, can increase input costs and squeeze the margins of downstream sectors while trade and banking sanctions can cull India’s export-import activity in the affected region until workarounds are found.

Many sectors may damage by ongoing conflict, but a few sectors such as steel and aluminium may benefit from rising prices. Net-net, the impact of the ongoing war will vary by sector. But a clearer picture, including of credit quality of affected companies, will emerge only in due course after the geopolitical situation improves.

Many rating agencies have trimmed India's growth forecast for FY22 and FY23 owing to soaring inflation and falling demand.

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First Published: 31 May 2022, 10:34 AM IST