As India makes a tryst with digital finance with the launch of the retail digital rupee on December 1, the trends emerging from the country’s economic performance reflect a mixed bag. The economy grew at 6.3% in the July-September quarter, down from 13.5% in the previous quarter. Manufacturing and mining sectors have contracted 4.3% and 2.8% respectively, while the production growth rate in eight key sectors slowed down to a 20-month low of 0.1% in October due to output contraction in crude oil, natural gas, refinery products and cement.
Soaring prices forced the RBI to hike borrowing costs to keep inflation in the 2-6% tolerance band. After raising its benchmark rate by 190 basis points this year, the central bank is expected to stay hawkish at the monetary policy review next week. However, with the agriculture and services sectors posting a growth of over 4% for the third straight quarter, it can be argued that the economy continues to recover, post the adverse impact of the Covid-19 pandemic, though the GDP numbers are lower than expected.
Higher interest rates and a lack of pick-up in consumption against the backdrop of a slowing global economy will pose challenges in the second half of the current financial year. Experts are predicting a slowdown in the third quarter due to global headwinds and slow export growth. The government should focus more on improving the economy than wading into unnecessary religious politics to try to divert the attention of the people.