Mumbai: Higher commodity prices on margins, the decline in wheat yields, and on higher base, in the fourth quarter of 2021-22 are some of the factors that may have slowed economic growth to 3.5 percent in the fourth quarter of 2021-22 from 5.4 percent in the previous three-month period, the IRCA rating which was released on Monday said.
The contact-intensive services attributable to the third wave of Covid-19 in the country may have also affected the economic growth in the quarter, said IRCA.The gross value added (GVA) at basic prices (at constant 2011-12 prices) in Q4 FY2022 seems to have eased to 2.7 percent from 4.7 percent in Q3 FY2022, the report stated.
“Q4 was a challenging quarter, with the Omicron-fueled third wave of Covid-19 arresting the momentum in contact-intensive services, and a pervasive pressure on margins from higher commodity prices”,said IRCA’s Chief Economist Aditi Nayar.
Moreover, the heatwave adversely affected wheat output in March 2022.
“We are apprehensive that both agriculture and industry will post a sub-1 percent GVA growth in Q4 FY2022, whereas services growth will print at around 5.4 percent,” said Ms. Nayar.
We are enthused by the recent excise duty cut on petrol and diesel, which has been complemented by VAT cuts by some states. This will bolster sentiment and create some cushion within stretched household budgets to undertake non-essential spending,” Ms. Nayar said.
The report also said, that the recent cut in excise duties on petrol and diesel will help boost sentiments and improve consumers’ disposable incomes, while simultaneously cooling the CPI inflation.
According to IRCA, the average CPI inflation for 2022-23 will be 6.5 percent, penciling in a 40 basis points repo rate hike in the June 2022 monetary policy review, amid a terminal rate of 5.5 percent.
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