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India's growth trend expected to soften from Sept quarter

India's growth trend expected to soften from Sept quarter

New Delhi: Foreign financial services major UBS predicted in a report that while a positive base effect would help increase India's real GDP growth to roughly 7.5-8 per cent YoY in the June quarter, the growth trend would weaken over the coming quarters towards 5-6 per cent YoY.

“We anticipate sequential normalisation in household consumption growth to continue as purchasing power is impacted by tight monetary policy and the depletion of accumulated pandemic savings," the report said.

Increasing capital expenditures by governments (both central and state) and robust demand for housing have supported steady expansion of capital expenditures. Private company capital expenditures are on the rise, although they are still on the slow side due to low demand for exported goods and uncertain global economic development. Although India's commodities exports have fallen over the past five months, services exports have remained relatively consistent, the report said.

Seasonally adjusted (SA) sequential growth in the UBS India Composite Economic Indicator (UBS India-CEI) was 4.4% in the June quarter (up from 3.0% in the March quarter).

The indicator suggests economic momentum in India has been sustained so far, even as reopening tailwinds have gradually faded and global headwinds remain. However, on a monthly basis, sequential momentum has started to soften, with the lead indicator up only 0.9 per cent MoM in June compared to 1.8 per cent MoM and 2.1 per cent MoM in the previous two months.

“We maintain our view that despite reasonable headline growth, the underlying economic recovery post-pandemic remains uneven when looked at in terms of the rural-urban divide, manufacturing vs. services growth; and affluent vs. lower-income household demand," the report said.—Inputs from Agencies

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