NEW DELHI: India’s government expects economic growth to slow in the financial year ending March, as pandemic-related distortions ease and pent-up demand for goods levels out going into 2023.

Gross domestic product (GDP) will likely rise 7 per cent this fiscal year, compared with 8.7pc the previous year, the Ministry of Statistics said in its first estimate for the period that put manufacturing growth at just 1.6pc.

The preliminary overall projection is lower than the government’s earlier forecast of 8-8.5pc, but above the central bank’s 6.8pc.

The government uses the estimates as a basis for its growth and fiscal projections for the next budget due on Feb 1. That will be the last full budget before Prime Minister Narendra Modi is expected to run for a rare third term in elections due in summer 2024.

India’s economy rebounded after Covid-19 restrictions were eased around mid-2022, but the war in Ukraine has spurred inflationary pressures, prompting the central bank to reverse the ultra-loose monetary policy it adopted during the pandemic.

It has raised key interest rates by 225 basis points since May to 6.25pc, the highest in three years, and another modest hike is expected early this year.

Since September, economists have been cutting their 2022-23 growth projections to around 7pc due to slowing exports and risks of high inflation crimping purchasing power. Construction growth was projected at 9.1pc, electricity at 9pc and agriculture at 3.5pc. Manufacturing and mining growth were forecast at 1.6pc and 2.4pc.

India’s nominal growth, which includes inflation, is projected to be at 15.4pc for 2022/23, up from an earlier 11.1pc estimate. “The nominal GDP growth is higher, implying that the government’s fiscal deficit target will be achieved,” said Sabnavis.

India remains a relative “bright spot” in the world economy, but needs to leverage its existing strength in services exports and extend it to job-rich manufacturing exports, an International Monetary Fund (IMF) official said on Friday.

Published in Dawn, january 7th, 2023