Growth pangs

India’s GDP recorded a disappointing growth of 5.4% in the third quarter (October-December 2021) of the ongoing financial year. This rate is slower compared to that of the previous quarters — 8.5% (July-September 2021) and 20.3% (April-June 2021). Higher consumption had been expected during the October-December period due to two reasons: one, it was the festive season; and two, Covid’s third wave — fuelled by the Omicron variant — had started picking up pace only towards the fag end of this quarter. The slowdown makes it obvious that private spending has been dismal as people are generally resorting to penny-pinching. In another dampener, India’s economy, the third largest in Asia, is projected to grow by 8.9% in the financial year ending later this month, down from the previously anticipated 9.2%.

It’s also worrying that during the October-December quarter, agriculture — the most resilient sector in the Covid years of 2020 and 2021 — grew by a lowly 2.6%. The numbers for the manufacturing sector (0.2%) and the construction sector (which shrunk by 2.8%) are also far from encouraging. Even as the third wave has petered out and the vaccination programme has achieved extensive coverage, the Finance Minister has flagged the ‘geopolitical risks’ that might impede economic recovery, particularly the adverse impact of the Russia-Ukraine conflict on exports and imports. International crude oil prices have already soared to a seven-year high.

In the Union Budget 2022-23, the Centre resolved to spend far more on infrastructure development to step up economic activity. However, government spending is not the only panacea for all economic woes. Private consumption has to be revved up to make growth robust and sustainable. Consumers will remain unenthused as long as the high prices of commodities continue to dent their purchasing power. Food inflation rose to 6.22% in January 2022, up from 5.93% in December 2021 and way above 2.38% recorded during the corresponding month a year ago. Reining in inflation as well as unemployment holds the key to building consumer confidence. 

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