© Reuters. FILE PHOTO: People shop at a crowded market ahead of Diwali, the Hindu festival of lights, in the old quarters of Delhi, India, October 11, 2022. REUTERS/Anushree Fadnavis
MUMBAI (Reuters) – India’s economy is expected to grow 5.5% in the next financial year, a notch below the expected potential rate of 6%, as growth momentum in the country was slowing gradually, an economist at HSBC said on Thursday.
The Indian economy grew 8.7% in year ended March 2022, and is expected to grow by 6.8% in the current financial year.
A Reserve Bank of India survey of professional forecasters released in December had pegged growth at 6% in 2023/24.
“While both exports and imports have slowed over the last few months, the former has slowed more sharply than the latter, indicating a sharper fall in the global growth momentum,” Pranjul Bhandari, chief India and Indonesia economist at HSBC Securities and Capital Markets (India) said in a note to clients.
Economists at the brokerage expect domestic demand to remain stronger as compared to global demand, the note said, adding that demand for goods – higher than services demand during the pandemic – has fallen in recent months.
“Urban demand has far outstripped rural demand over 2022, but is also moderating since mid-2022, led primarily by goods,” the note added.
Rural demand, which has been weak throughout 2022, could tick higher though due to strong sowing during the winter season and moderating rural inflation.
Investment activity has been more resilient than consumption-spending in 2022, helped by government capex and rising investment intentions by large corporates, Bhandari said.
HSBC further said the changing growth dynamics are likely to have a bearing on upcoming policy events like the Federal budget and central bank’s monetary policy meetings.
“Our overall message is that the growth momentum is slowing gradually, but not uniformly,” the economist said.