India's status as world's fastest growing major economy to be short-lived – Reuters poll

India likely recorded strong double-digit economic growth in the last quarter but economists polled by Reuters expected the pace to more than halve this quarter and slow further toward the end of the year as interest rates rise, per the latest poll released on Monday.

Key findings

Growth this quarter is predicted to slow sharply to an annual 6.2% from a median forecast of 15.2% in Q2, supported mainly by statistical comparisons with a year ago rather than new momentum, before decelerating further to 4.5% in October-December.

The median expectation for 2022 growth was 7.2%, according to an Aug. 22-26 Reuters poll, but economists said that the solid growth rate masks how rapidly the economy was expected to slow in coming months.

While the central bank's mandated target band is 2%-6%, inflation was expected to average 6.9% and 6.2% this quarter and next, respectively, before falling just below the top end of the range to 5.8% in Q1 2023. That is roughly in line with the central bank's projection.

The economy is also enduring inflation pressure from a weak rupee, which for months has been trading close to 80 to the U.S. dollar, a level the central bank has been defending in currency markets by selling dollar reserves.

The latest Reuters poll also showed India's current account deficit swelling to 3.1% of gross domestic product this year, the highest in at least a decade, which may put further pressure on the currency.

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