India’s economic recovery strengthens in Q2 but Omicron looms

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India’s economy grew by 8.4 per cent in the quarter ended September compared to a year ago.

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India’s economy continued to bounce back strongly in the quarter ended September, as a further rollback of COVID-19 restrictions helped boost consumer spending. But the emergence of the Omicron version could pose a threat to that momentum, some analysts have warned.


India’s gross domestic product (GDP), which measures the output of goods and services in the country – grew at a sharp 8.4 per cent in the quarter ended September from a year ago, government data showed on Tuesday.

It marked the strongest recovery rate among the world’s major economies and followed from the previous quarter when India’s year-on-year growth was a whopping 20.1 per cent.

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Gains were broad in the three months ending September (the second quarter of India’s fiscal year), with the majority of GDP contributing to the country’s growth. Government spending was strong, in the form of consumer spending and agriculture. One notable bright spot was the renewed appetite for customer-facing services that were hit hard by the COVID restrictions earlier this year.

That broadening strength helped shore up analysts’ forecasts for healthy full-year growth, but the emergence of the Omicron version of COVID-19 has injected uncertainty into the outlook.

Radhika Rao, an economist at DBS Bank, Singapore, said, “Reopening of profits, easing demand, improved agricultural production, higher public spending and restarting the service sector have been important sources of support in this quarter.” “We maintain our full-year growth forecast at 9.5 percent, keeping an eye on the evolving situation with the new (COVID-19) version.”

One component of GDP that continues to lag is factory activity. Like all economies around the world, India is grappling with supply chain disturbances, high energy prices and raw material shortages that are halting manufacturing.

“The global semiconductor shortage weighed on vehicle production, while the coal shortage took a toll on the industry this quarter,” said Shilan Shah, senior Indian economist at Capital Economics.

Shah also sees potential clouds to overcome Omicron.

“While vaccination coverage is still very low, the risk of a renewed virus outbreak remains,” he said. “The new Omicron strain of the virus detected in southern Africa may be the factor that explains these concerns upon arrival in India.”


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