NEW DELHI: India’s effort to boost consumption through government spending and low interest rates is paying off, with the economy gaining strength just as a new coronavirus variant emerges as the top threat to a global recovery.
The South Asian nation remains on track to post the fastest growth among major economies as most sectors, including services and exports, show momentum. Gross domestic product will expand 9.3% in the fiscal that ends March, according to a Bloomberg survey of economists, a touch faster than the 9.2% forecast last month, report agencies.
While she said it’s too early to predict the impact of the omicron strain, the cost of lockdowns has been falling as they become more targeted and shorter.
Official data due later Tuesday will likely show GDP in the July-September quarter grew 8.3% from a year ago, according to the median estimate in a Bloomberg survey. That’s slower than 20.1% growth in the previous quarter—which largely reflected a bounce back from last year’s crash—but marks a fourth straight quarter of expansion.
India loosened fiscal and monetary policy to power through the pandemic-induced slump, and has vowed to keep it like that for as long as necessary to support growth.
Finance Minister Nirmala Sitharaman has made infrastructure spending a priority ahead of the February budget, where she will give an annual plan of the government’s expenditure and revenue goals.
Meanwhile, the Reserve Bank of India is expected to leave its record low interest rates unchanged when it announces monetary policy next week. The low interest rate regime is expected to drive growth even when policymakers scale back the support extended during the pandemic.
Agriculture, which is the primary source of livlihood for more than half the nation’s population and emerged as the only bright spot when the pandemic ravaged the economy, is expected to keep the growth momentum rolling after a normal monsoon this year.
There are still risks to the outlook. Rising input costs due to supply-side disruptions and global commodity prices are squeezing margins of companies.