Commodity prices jump, lower wheat yields amid heatwave and Omicron hit on contract-driven sectors accelerated momentum
Commodity prices jump, lower wheat yields amid heatwave and Omicron hit on contract-driven sectors accelerated momentum
Rating agency ICRA has forecast that India’s GDP growth may slow to 3.5% in the fourth quarter of 2021-22, from 5.4% in the October-December 2021 quarter. The Gross Value Added (GVA) of the economy is expected to grow even slower at 2.7% between January and March 2022, compared to 4.7% in the previous quarter.
The rating firm attributed the deceleration in growth momentum to the third COVID-19 wave due to the impact of higher commodity prices on margins, decline in wheat yields and hiccups in recovery of contract-intensive services, as well as a higher base than the previous one. ordained. Year.
The National Statistical Office (NSO) is scheduled to release the updated National Income Estimates for 2021-22 on May 31. In its previous estimates, the NSO had projected a GDP growth of 8.9% for the last financial year, assuming a growth rate of 4.8%. for the fourth quarter.
Aditi Nair said, “The last quarter (Q4) of 2021-22 was challenging, with the third wave of Omicron-fuelled COVID-19 arresting momentum in contact-intensive services, and margins were heavily pressured by higher commodity prices ” Economist at ICRA
He added, “Moreover, the heat wave has adversely affected wheat production in March 2022. We are apprehensive that both agriculture and industry will see less than 1% GVA growth, while services growth will be around 5.4% for the quarter. Will be.”
This indicates a sharp sequential decline – services posted a GVA growth of 8.2% in the previous quarter, while industry grew by 0.2% and agriculture by 2.6%.
The agency said the Omicron effect could push growth for the contact-intensive business, hotel, transportation, communications and services sectors to about 3% in Q4, up from 6.1% in Q3.
ICRA expects India’s retail inflation to average 6.5% in 2022-23 and said the recent cut in petroleum taxes, supported by reduction in state duty on petrol and diesel by Maharashtra and Kerala, strengthened sentiment. Could and make some cushions for the extended home. Budget
“Furthermore, the deceleration in the inflation trajectory for the remainder of this year has reduced the likelihood of a rapid front-loaded monetary tightening”, Ms Nair said.