By Tushar Goenka

BENGALURU, (Reuters) – India’s recovery from the pandemic-related shut downs could be delayed for six more months, according to economists polled by Reuters. They expect that elevated inflation will continue to rise and not slow down.

The rising cost of fuel has caused price pressures to soar in India, the second-most populous nation in the world. However, the Reserve Bank of India will not likely raise interest rates before the start of the next financial year in April-June 2022.

With concerns over growth still lingering, the RBI falls behind emerging market peers who are raising rates.

Kunal Kundu, Societe Generale (OTC): “While extremely accommodating monetary policy prevented the economy falling off the cliff,” said Kunal Kundu.

The Sept. 27-Oct. 4, poll showed that year-on-year growth was 7.8%, 6.0%, and 5.8% respectively for Asia’s third-largest economy. This is in contrast to the Q3-2022 poll which forecasts 7.8%, 6.0%, and 5.8% respectively. For Q3 2022 and Q1 2022, the July poll had higher predictions.

This is in addition to a 20% increase in April-June quarter.

This fiscal year, the average gross domestic product growth (GDP) is expected to be 9.2%. For the next fiscal year, the growth rate is expected to be 9.7% and 7.1% in the first two quarters of the financial year and 6.5% and 6.4% respectively for the second and third quarters. The average 7.0% for 2022/23 will also be seen.

These projections were largely unchanged in July’s poll.

Questioned about whether there is a greater risk for those numbers in the remaining fiscal year of the fiscal, 23 percent of 34 people, which represents more than half of all respondents, stated that there would be a slow recovery but with minimal downside. Eight of the respondents indicated a strong recovery that was followed by an update, while three others stated they were weak and susceptible to more downgrades.

Kundu stated that “but with inflation expected not to stay elevated…continuing with ultra-accommodative monetary policy when the economy’s in recovery phase could lead to stagnation, which can impact the recovery itself.”

The poll showed that inflation would rise to a high level above the RBI’s long-term target at 4%, but it will remain under the 6% threshold through 2024.

The RBI has been vocal about its intention in helping the government bolster growth and said policy support from all sides https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52008#:~:text=The%20conduct%20of%20monetary%20policy,the%20nascent%20and%20hesitant%20recovery is required to nurture a nascent and hesitant recovery.

“It won’t be long before financial conditions begin to tighten and before rates go up. Capital Economics said Shilan Shah that rates will rise when the economy needs to be in better health.

“The main picture is that for several more months, policy will be extremely accommodating.”

Despite uncertainties surrounding the speed of recovery, Indian share prices continue to reach records highs, despite these concerns.

Indian shares have attracted investors as mobility and businesses recovered faster than anticipated from the second wave of COVID-19 in April-May.

Major restrictions have been lifted, which has led to a better jobless picture. Another 17 out of 27 people surveyed said that there is a very low to moderate risk of unemployment rising in the next year. Rest of the respondents said that there was high risk.

(For additional stories about the Reuters global economy poll, click here