RBI has elevated rates of interest by 250 foundation factors since May to tame inflation. (File)

India’s financial enlargement seemingly slowed within the October-December interval, as rising borrowing prices crimp consumption that is a key progress driver.

Gross home product in all probability rose 4.7% final quarter from a yr in the past, in line with a median estimate of economists in a Bloomberg survey forward of information due Tuesday at 5:30 p.m. native time. That would be the slowest quarterly efficiency because the 4.09% enlargement within the three months ended March final yr.

Economists are projecting progress of 6.9% for the fiscal yr from April 2022 to March 2023 — a tad under the federal government’s prior 7% estimate and barely increased than the International Monetary Fund’s 6.8% projection.

“There are signs that higher interest rates are feeding through to the real economy,” stated Shilan Shah, a senior economist at Capital Economics in Singapore, citing falling passenger automobile gross sales and slowing retail transactions. “This suggests that consumption has weakened a touch.”

Waning consumption, which accounts for 60% of GDP, dangers hurting progress in Asia’s third-largest economic system, as borrowing prices rise. The Reserve Bank of India has elevated rates of interest by 250 foundation factors since May to tame inflation and signaled it isn’t ready to pause simply but, amid rising dissent inside the rate-setting panel.

“My fear is that all sources of demand in the economy are contracting at the same time,” Jayanth Rama Varma, an exterior member of RBI’s Monetary Policy Committee, stated in a latest interview. 

With exports struggling on waning world demand and the federal government forges forward with fiscal consolidation, Varma stated rising borrowing prices will dent family budgets and, in flip, consumption. For Shashanka Bhide, one other fee setter, demand within the economic system is fueling inflation.

What Bloomberg Economics Says…

With the restoration on shaky floor, we expect any additional tightening would amplify draw back dangers to progress.

— Abhishek Gupta, senior India economist

There is perhaps extra ache in retailer as rates of interest go up additional and client activity in India’s key export market — the US — loses steam. 

“Exports have slowed in the December quarter as the global economy hits the brakes,” stated Pranjul Bhandari, chief India economist at HSBC Holdings Plc. “There were pockets of resilience,” she stated, citing funding, bettering rural economic system, and items outperforming companies.

That’s serving to India pull off a comparatively robust efficiency in a troublesome setting the place even China indicators are pointing to an uneven restoration regardless of its reopening. India is poised to develop on the world’s quickest tempo within the fiscal yr beginning April, in line with the IMF.

“A resilient domestic backdrop and continued increase in services activity continued to prop up India’s growth,” stated Rahul Bajoria, an economist with Barclays Bank Plc.