India’s GDP growth further slows to 4.1% in Q4; FY22 growth at 8.7%

India's economic growth further slowed during the fourth quarter, hit by Omicron-led restrictions in January, global supply shortages and higher input costs.

Gross domestic product in the January-March period grew 4.1%, data released by the Statistics Ministry showed Tuesday. In the third quarter of FY22, GDP growth slowed to 5.4% from 8.5% in the second quarter and 20.3% in the first quarter.

The growth in the financial year 2021-22 stood at 8.7%. In its second advance estimate, the government had estimated the GDP to grow at 8.9% in FY22.

Asia’s third largest economy had just begun recovering from the pandemic-induced slump when a surge in Omicron cases in January brought back some of the virus-related restrictions. The war in Ukraine, in February, further added to its woes, pushing up commodity prices and squeezing supplies further.

In the March quarter, the agriculture sector grew 4.1%, while the manufacturing segment contracted 0.2%. The gross value added (GVA) during the fourth quarter stood at 3.9%, while that for the full financial year was at 8.1%.

High inflation is dampening consumer sentiments and growth prospects. In April Consumer price inflation has hit a eight-year high of 7.8% and is seen averaging 6.52% this fiscal, up from 6% projected in an earlier survey.

The RBI is expected to raise repo rate by another 50 basis points to 4.9% by June.

Analysts said the outlook remains clouded for future growth with geopolitical uncertainties and soaring crude oil prices.

"While the readings have broadly come In line with expectations, The outlook remains clouded with uncertainties especially with escalating crude oil prices. Further, weak labor markets, limited ability on additional fiscal spends, reduced corporate margins due to rising input prices and weaker global demand remain a concern," said Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank.

Meanwhile, Sujan Hajra, Chief Economist and Executive Director at Anand Rathi said even though the growth was marginally lower than the expectations, there are several positive indicators.

"The rebound in capex in FY22 is the biggest positive. Even private consumption shows signs of improvement. But for large trade deficit and subdued increase in government consumption, GDP growth could be in double digits in FY22 and close to 8% in Q4 FY22. Despite the ongoing geopolitical uncertainties, supply disruptions, high commodity prices, inflation and monetary tightening, we expect India to continue to be the fastest growing major economy of the world in FY23 as well with 7.5% growth," Sujan Hajra said.