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Delayed recovery biggest risk to pandemic-hit Indian economy: Poll

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The GDP growth in this financial year is estimated to average 9.2%.

The pandemic-related shutdown threatens to further delay India’s economic recovery by six months this fiscal year, according to economists in a Reuters poll, who expect inflation to pick up or decline.

Price pressure in the world’s second most populous country has increased due to rising fuel prices, but the Reserve Bank of India does not expect a hike in interest rates until at least the beginning of the next financial year in April-June 2022.

With concerns about risks to growth, this leaves the RBI slightly behind many of its emerging market peers who are already raising rates.

Kunal Kundu said, “While extremely liberal monetary policy has prevented the economy from falling off a cliff, the continuation of this policy in the absence of proper financial support will hardly move the needle in terms of the pace of recovery of lost growth potential.” ” Societe Generale.

In the survey from September 27 to October 4, year-on-year economic growth in Asia’s third-largest economy was estimated at 7.8 per cent, 6.0 per cent and 5.8 per cent for Q3, Q4 and Q1 2022, respectively. A July survey offered higher forecasts for Q3 and Q1 2022.

This is an expansion of 20.1 per cent in the April-June quarter, the highest since the mid-1990s, helped by a much lower base – the start of the pandemic in the prior year.

Gross domestic product (GDP) growth is expected to average 9.2 percent in the current financial year. In the next financial year, growth is seen at 9.7 per cent and 7.1 per cent for the first two quarters and 6.5 per cent and 6.4 per cent for the last two quarters, averaging 7.0 per cent during 2022/23.

Those forecasts are largely unaffected by the July election.

When asked about the greater exposure to those numbers for the rest of the fiscal year, 23 of 34, or more than two-thirds of the respondents, said delayed recovery with limited decline. Eight said a strong recovery was followed by an upgrade, and the remaining three reported weak and further downgrades likely.

Kundu said, “But with inflation expected to remain high… persisting with over-accommodative monetary policy when the economy is in a recovery phase could lead to a recession, affecting recovery.” can.”

According to the survey, inflation was projected to remain well above the RBI’s medium-term target of 4 per cent, but was projected to remain below the 6 per cent upper limit until at least the end of 2024.

The RBI has been vocal about its intent to help the government accelerate growth and said policy support is needed from all sides to help it overcome a nascent and hesitation.

“It will be a long time before financial conditions tighten and policy rates are hiked. When the economy should be closer to health, rate hikes will be on the agenda,” said Shilan Shah at Capital Economics.

“The big picture is that the policy will remain very lenient for several months now.”

Even as uncertainty remains about the pace of recovery, the Indian stock market appears to be taking aback as share prices hit record highs repeatedly.

Investors have been bullish on Indian stocks as businesses and dynamics recover from the devastating second wave of COVID-19 during April-May.

With the lifting of major restrictions, the situation of the unemployed has also improved. 17 out of 27 respondents said low or very low risk unemployment would increase in the coming year. The rest said there was a high risk.

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