India’s Economic Growth Slows Down
India’s economic growth is likely to have slowed down in the April-June quarter of this fiscal year. This deceleration is mainly due to weak urban demand and sluggish private investment. The recent tariff hikes by the US on Indian goods, including textiles and footwear, are also expected to impact exports. Despite these challenges, the country’s GDP growth for this period is estimated at 6.7%, according to a Reuters poll of economists.
US Tariff Hikes on Indian Goods
The US has doubled its tariffs on Indian goods to as high as 50%. This move comes in light of New Delhi’s purchase of Russian oil. This is the most severe rate among US trading partners, matching that of Brazil. Economists have warned that such a drastic measure could hurt India’s growth and jobs in the long run.
Impact on India’s Economy
Despite the anticipated slowdown, India is still one of the fastest-growing major economies. The central bank expects full-year growth to remain close to 6.5%, with “minimal impact” from higher tariffs. A good monsoon, strong government spending, easing food inflation, and front-loaded US shipments are said to have supported growth in the quarter despite weak urban demand and slow private investment.
Nominal GDP Growth Expected at 8%
Nominal GDP growth, which includes the impact of inflation, is expected to have softened to 8% after averaging nearly 11% over the last eight quarters. The lower nominal growth, driven by multi-year low inflation, is likely to have impacted government tax revenues and corporate profits. Annual sales growth of 1,736 listed private manufacturing firms eased to 5.3% in the June quarter from 6.6% in the previous quarter.
Concerns Over Prolonged Higher US Tariffs
Some economists fear that prolonged higher US tariffs could further dent India’s growth in the coming quarters. This is mainly due to a slowdown in exports and its impact on the country’s attractiveness as an alternative manufacturing hub to China. “If it sticks for a year, GDP growth can slide by 0.7% points, with much of the burden falling on labor-intensive sectors such as jewelry, textiles, and food items,” said Pranjul Bhandari, chief economist at HSBC.
Conclusion
In conclusion, India’s economic growth has slowed down in the April-June quarter due to various factors, including weak urban demand and US tariff hikes. While the country is still one of the fastest-growing major economies, the prolonged higher US tariffs could further impact its growth in the coming quarters. It is essential for the government to take measures to boost urban demand and private investment to mitigate the effects of the tariff hikes and ensure sustainable economic growth.
