India set to lose fastest growing major economy tag

Hit by weakening demand, the Indian economy is expected to grow at a slower 7 per cent rate in the current fiscal ending March 2023, setting the stage for the country losing the fastest-growing major economy tag.The 7 per cent expansion projected in the first official estimate released by the Statistics Ministry compares with 8.7 per cent gross domestic product (GDP) growth in 2021-22. The projections are much lower than government's earlier forecast of 8-8.5 per cent growth but above the Reserve Bank's projection of 6.8 per cent. If the forecast comes true, India's GDP growth will be lower than Saudi Arabia's expected 7.6 per cent expansion. In fact, India's GDP growth in the July-September quarter at 6.3 per cent was lower than the 8.7 per cent of Saudi Arabia. The first advance GDP estimates, which are used to work out allocations and other fiscal projections for the next Budget due on February 1, proved to be more optimistic than the actual growth in three out of the last four years.

The projections suggest that despite the global headwinds and continued geopolitical uncertainty caused by the Russia-Ukraine conflict, the recovery is on track though there are pressure points. Inflation has been sticky despite a 225 basis points increase in interest rates since last May, which is likely to moderate demand. As per the first advance estimates of national income released by the National Statistical Office (NSO) on Friday, the manufacturing sector output is estimated to decelerate to 1.6 per cent in the current fiscal from 9.9 per cent in 2021-22. Similarly, mining sector growth is estimated at 2.4 per cent in the current fiscal as against 11.5 per cent in 2021-22.