India's domestic economy is its primary engine of growth: Moody's

India's domestic economy is its primary engine of growth and the slowdown in economic activity late last year will only be temporary, said Moody's Analytics on Tuesday.

Citing that the private consumption lagging overall GDP for the first time since the Delta wave of Covid-19 struck the economy in the second quarter of 2021, the Moody's Analytics in its report on emerging market outlook said growth slowed substantially on a year-ago basis.

"Our take is that the slowdown late last year will be temporary and even salutary, helping to wring some of the demand-side pressures out of the economy without stopping it wholesale. On the external front, better growth in the US and Europe's incipient recovery will propel India at the mid-year mark," Hindustan Times quoted Moody's Analytics report.

Adding more, the report said that in contrast to most other emerging-Asia economies, India's domestic economy, rather than trade, is its primary engine. "With this in mind we observe India's fourth-quarter performance with caution," it said.

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GDP figures: 

Notably, Indian economy grew 13.2 per cent in April-June quarter and 6.3 per cent in July-September quarter. While India's gross domestic product (GDP) growth slowed to a three quarter low of 4.4 per cent in October-December, 2022, government data said.

The government cited contraction in manufacturing and low private consumption expenditure as the reason for the slowdown. In the October-December quarter of current fiscal, the the manufacturing sector contracted by 1.1 per cent, while private consumption expenditure slowed to 2.1 per cent.

Compared to 11.2 per cent growth in the same quarter of last fiscal, slowdown in GDP growth in December quarter was stark.

"While high interest rates have slowed the domestic economy and curbed imports, external imbalances have widened, putting pressure on the rupee and adding to inflation," Moody's Analytics noted.

GDP projection:

Meanwhile, the GDP is projected to grow by 7 per cent in FY 2022-23 as per official estimates, which means this will require about 5 per cent GDP expansion in the fourth (January-March) quarter.

It is to be known that that the Indian economy grew 9.1 percent in FY 2021-22, while in 2020-21, it contracted 5.8 per cent, and in 2019-20 the growth was 3.9 per cent.