India’s economic recovery slows amid growing external risks

India’s economic recovery slows amid growing external risks

Bloomberg / New Delhi

India’s economy will grow slower than previously forecast because of disruptions from the latest wave of coronavirus cases and as risks mount from higher prices of commodities amid Russia’s invasion of Ukraine.

Gross domestic product will expand 8.9% in the year ending March 31 after a 6.6% contraction last fiscal, according to the data released by the Statistics Ministry on Monday. While that recovery will be the quickest among major economies, it’s slower than the median 9.1% pace estimated in a Bloomberg survey of economists, and 9.2% expansion projected by the government last month.

The slowing momentum follows activity curbs spawned by the Omicron variant of the virus and external risks, most notably from high commodity prices that are being exacerbated by the Russia-Ukraine crisis. A weaker pace of expansion could hurt investment and job creation, testing fiscal and monetary policies that have remained loose despite rising inflationary pressures.

“The downsized GDP growth should be seen as a combination of revision to last year’s number and impact of Omicron wave getting captured,” said QuantEco Research economist Yuvika Singhal. “The Ukraine-Russia geopolitical risk still remains a developing story which may have not been fully captured.”

Higher oil prices on