India’s Economy Grows, But Falls Short of Expectations

India, the third-largest economy in Asia, saw its GDP grow by 13.5% in the April-June quarter from a year earlier. This marks the fastest pace of growth in a year and comes amid concerns of growth slowing due to increased interest rates.

The increase in production can be traced to a spike in agriculture and manufacturing as pandemic curbs eased, making India one of the fastest-growing major economies in the world for the quarter.

Analysts had forecast that India’s economy would grow 15.2% year-on-year this quarter, meaning the increase still fell short of expectations. Despite the encouraging growth, economists have cautioned that the surge this quarter may be followed by a slowdown.

In July, the IMF revised its growth forecast for India from 8.2% to 7.4% for the current fiscal year, which began in April.

What does this mean for me? 

The double-digit growth in the second quarter comes at a time when the global economy is under strain, with most countries facing high inflation and battling with the knock-on effects of Russia’s invasion of Ukraine. In recent times, fresh waves of COVID-19 outbreaks have hit India’s large informal sector, with unemployment rising to nearly 8.5% in August. 

Emerging-economy investors will be encouraged by the latest figures, although they should be wary about what is around the corner as inflation remains a threat. To protect the economy, India’s central bank has raised interest rates three times since May.