NEW DELHI (Al-Jazeera) - India’s government expects economic growth to slow in the financial year that ends on March 31 as pandemic-related distortions ease and pent-up demand for goods levels out going into 2023.
Gross domestic product (GDP) will likely rise 7 percent in the current fiscal year compared with 8.7 percent the previous year, the Ministry of Statistics said. It put manufacturing growth at just 1.6 percent.
The preliminary overall projection is lower than the government’s earlier forecast of 8 percent to 8.5 percent but above the central bank’s 6.8 percent.
The government uses the estimates as a basis for its growth and fiscal projections for the next budget, due on February 1. That will be the last full budget before Prime Minister Narendra Modi is expected to run for a rare third term in elections due in the middle of 2024.
India’s economy rebounded after COVID-19 restrictions were eased around mid-2022, but the war in Ukraine has spurred inflationary pressures, prompting the central bank to reverse the ultra-loose monetary policy it adopted during the pandemic.
It has raised key interest rates by 225 basis points since May to 6.25 percent, the highest in three years, and another modest hike is expected early this year.
Since September, economists have been cutting their 2022-23 growth projections to around 7 percent due to slowing exports and risks of high inflation crimping purchasing power.
Construction growth was projected at 9.1 percent, electricity at 9 percent and agriculture at 3.5 percent. Manufacturing and mining growth were forecast at 1.6 percent and 2.4 percent.
Growth in manufacturing was disappointing as corporate profits in the second quarter shrunk, said Madan Sabnavis, an economist at the Bank of Baroda.