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India economy likely grew at weakest pace in a year in January-March: Reuters poll

Tan KW
Publish date: Mon, 27 May 2024, 05:31 PM
Tan KW
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BENGALURU (May 27): India's economy likely grew at its slowest pace in a year in the January-March quarter due to weak demand, according to a Reuters poll of economists who said the possibility of growth significantly surpassing their forecasts was low.

The country's gross domestic product (GDP) unexpectedly grew by 8.4% in October-December compared to a year earlier, thanks to a sharp drop in subsidies which provided an artificial boost to net indirect taxes. But economic activity, as measured by gross value added (GVA), showed a more modest 6.5% expansion.

Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, said 5%-6% was a "reasonable" potential growth rate for India's economy.

"For this potential to be reaped, though, reforms need to be pursued, and Modi 2.0 took some steps back on this front - a reversal of agriculture reforms, delay in the implementation of new labour codes and a broad turn away from regional trade agreements."

A growing divergence between financial economists' GDP forecasts and government estimates has also raised questions over how India measures growth.

The National Statistical Office (NSO) said it expected GDP growth to be 5.9% in the January-March quarter.

"I think there is a slight overestimation of the informal sector GDP...which is why things on the ground probably do not look as exuberant as the headline numbers suggest," said Dhiraj Nim, economist at ANZ.

The informal sector contributes nearly half of the country's GDP and employs about 90% of India's workforce.

 


  - Reuters

 

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