India has, for the first quarter (April-Jun) of this fiscal year, shown a high Gross Domestic Product (GDP) growth at 13.5% year-on-year, while the entire world is struggling with economic crisis. China could barely manage 0.4% of GDP growth, while United States has only shrunken by 1.6% during the same period.
The outperformance by world's fastest growing economy could have been fueled by the reopening of service sector, high private consumption (around 26%) and fixed asset investments. While the growth was also aided by the low base of last year. Year 2021 was extremely horrible as second Covid wave and lockdowns had pushed the world into the dark abyss of numerous economic and other unavoidable challenges.
"Real GDP or Gross Domestic Product (GDP) at Constant (2011-12) Prices in Q1 2022-23 is estimated to attain a level of ₹ 36.85 lakh crore, as against ₹ 32.46 lakh crore in Q1 2021-22, showing a growth of 13.5 percent as compared to 20.1 percent in Q1 2021-22." (The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MOSPI), India)
As per MOSPI's press release, growth in Q1FY23 in different areas include agriculture (4.5%); electricity and other utilities (14.7%); construction (16.8%), financial, and real estate services (9.2%); and public administration and defence services (26.3%); manufacturing (4.8%); trade, hotel, transport, communication & broadcasting services (25.7%); mining and quarrying (6.5%).
The double digit growth for developing country is commendable, especially considering all kinds of challenges the world has been going through in the past two years. Although, the actual growth has fallen a little short of projections of 15.7% by State Bank of India SBI) and 16.2% by Reserve Bank of India (RBI).
The major contributor to Indian economy is the consumer spending, which stands at 55%. People enjoy high spending as long as the loan comes at cheap or affordable rate of interest. However, if RBI, India's central bank, decides to increase the interest rates on credit and loans, then things could take a u-turn for the country. RBI is expected to hike the repo rate by 25bps in coming months.
Recently, RBI has been focusing more on tackling the rising inflation, than growth. The largent bank of India, SBI has increased the lending rate on home loans to 8.05% in August from 6.7% same month last year. This is not a good indicator for the country's growth in the coming months.
Considering other factors, such as ongoing Russia-Ukraine war, rising world inflation, US dollars are getting stronger,
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