India’s economy losing speed as rising rates hit demand: report

New Delhi: The rising borrowing cost will impact negatively on India’s growth rate, slowing the economy in the October-December period, says a report by Bloomberg.

Economists responded to a survey by Bloomberg projected growth of 6.9% for the fiscal year from April 2022 to March 2023.

This falls a notch below the government’s estimate of 7 per cent, while the International Monetary Fund's projection stands at 6.8%.

According to a median estimate, gross domestic product rose by 4.7 per cent last quarter, which reportedly is the slowest quarterly performance compared to the 4.09% expansion March last year.

Pointing at falling vehicle sales, Shilan Shah, a senior economist at Capital Economics in Singapore, said that ‘higher interest rates are feeding through to the real economy,’ weakening consumption a touch.

Fall in consumption, which is responsible for 60% of GDP, leads to the risk of slowing the growth of India's economy.

Since May the Reserve Bank of India hiked interest rates by 250 points in its efforts to tame inflation.

RBI however reportedly is not ready to stop further raising the rates, just as many on the rate-setting panel dissent with the idea, as per the report.

Jayanth Rama Varma, an external member of RBI's Monetary Policy Committee, is quoted as expressing concern over all sources of demand in the economy contracting at the same time.

Verma added that rising borrowing costs will impact on household budgets affecting consumption, according to the report.