The economic growth may have slowed to 3.5 percent in the fourth quarter of 2021-22 from 5.4 percent in the previous three-month period due to the impact of higher commodity prices on margins, the decline in wheat yields, and a higher base, ICRA Ratings said on Monday.
The agency said the hiccups in the recovery of the contact-intensive services attributable to the third wave of COVID-19 in the country may have also affected the economic growth in the quarter. Even the gross value added (GVA) at basic prices (at constant 2011-12 prices) in Q4 FY2022 seems to have eased to 2.7 percent from 4.7 percent in Q3 FY2022, it said.
The National Statistical Office (NSO) will release the fourth quarter numbers of fiscal 2022 on May 31.
ICRA's Chief Economist Aditi Nayar said Q4 was a challenging quarter, with the Omicron-fuelled third wave of COVID-19 arresting the momentum in contact-intensive services and pervasive pressure on margins from higher commodity prices.
Moreover, the heatwave adversely affected wheat output in March 2022.
"We are apprehensive that both agriculture and industry will post a sub-1 percent GVA growth in Q4 FY2022, whereas services growth will print at around 5.4 percent," Nayar said.
The agency further said that the recent cut in excise duties on petrol and diesel will help boost sentiments and improve consumers' disposable incomes, while simultaneously cooling the CPI inflation.
Last week, the government cut excise duty on petrol by a record Rs 8 per liter and that on diesel by Rs 6 per liter to give relief to consumers battered by high fuel prices that have also pushed inflation to a multi-year high.
Retail inflation, as measured by consumer price-based inflation (CPI), accelerated to an eight-year high of 7.79 percent in April.
"We are enthused by the recent excise duty cut on petrol and diesel, which has been complemented by VAT cuts by some states. This will bolster sentiment and create some cushion within stretched household budgets to undertake non-essential spending," Nayar said.
Icra projects the average CPI inflation for FY2023 at 6.5 percent, penciling in a 40 basis points repo rate hike in the June 2022 monetary policy review, amid a terminal rate of 5.5 percent.