India’s economy grew in line with the market expectation for September quarter, however economists warn that risks such as the Covid variant of omicron may limit future growth.

Gross domestic product grew 8.4% from July to September — India’s fiscal second quarter — compared to a year ago, according to data released by India’s statistics ministryOn Tuesday. This was consistent with economists’ growth expectations, according to Reuters.

India’s economy declined 7.4% during the same period in last year. This was due to months of national lockdown caused by the coronavirus pandemic.

The data will be a positive for the Reserve Bank of India’s monetary policy committee next week. However, it is not wide-based. Analysts at ANZ Research say that growth was slow in areas such as non-financial and non-public service sectors.

The new Covid variant of omicron was flagged by economists. first identified by South African scientistsIndia’s economic future could be uncertain because of this.

In a Tuesday note, Goldman Sachs analysts stated that the risk of increased restrictions during the first half 2022 is there to stop the spread the new omicron version.

It omicron strain has already been detected in multiple countriesIt has been a popular route from Australia, Hong Kong and the U.K. to the U.K. or the Netherlands. Its emergence rattled marketsIt has forced several countries to revise their plans to open reopening. Experts are worried about this variant’s transmissibility due to its unique number of mutations as well as the profile that it has over previous versions.

India has already reviewed its plans for reopening its borders to wide swathes international travellers. The South Asian nation introduced Covid testing at all airports, and a 7-day quarantine in the home for travelers from high-risk countries. India has yet to detect the omicron variant.

India may need to increase its vaccination rates due to uncertainties surrounding the omicron-related strain. This could be necessary before households experience a sustained recovery in spending.

“We expect a slowdown in the growth rate.” [in the current quarter]She said that the subdued consumer mood was a contributing factor.”

We seek a longer-lasting recovery. [April-June quarter]From then on, 80% of the country’s population will likely be fully vaccinated. Kishore said that this assumes the Omicron variation doesn’t significantly reduce vaccine effectiveness.

He stated that “there’s little likelihood that, given the extent of slack economy and the incompletion of the recovery,” the RBI would want more evidence that the recovery has been properly grounded before it can move on to policy.”Squawk Box Asia.”

Aziz stated that although liquidity may be fiddled with a little, it doesn’t seem to have any impact on rates.

The September quarter’s private consumption spending was up compared with a year earlier, however it remains slightly lower than the level of 2019.

Analysts at ANZ said that some positive factors which led to 8.4% growth could wane. This would mean that the central bank needs to remain accommodative in its efforts to stimulate growth.

The September quarter saw private consumption perform better than anticipated, probably due to festive demand. This is expected to decrease in subsequent months. They suggested that India’s exports could also slow down due to a moderated external demand.

The authors also noted that the government support for growth might not be as strong. [the second half of fiscal year 2022].”

This is because India’s target fiscal deficit of 6.8% GDP could limit government spending, as expected lower tax revenues will result. tax cuts on fuel divestment receipts might disappointAnz analysts stated that it was.