Interest Rates Likely To Rise

While the emergence of the Omicron variant has reignited uncertainty, India’s economic recovery is likely to gain momentum this year. This, in conjunction with uncomfortably high domestic inflation, will set the stage for interest rates to rise over 2022. Nevertheless, the increase in interest rates is likely to be modest, so savers may be in for marginal real returns. Here’s a quick recap: India’s real GDP expanded by 8.4 per cent year-on-year (y-o-y) in Q2 FY2022. With this, the absolute level of GDP inched above the pre-pandemic level of Q2 FY2020, an important milestone. However, the disaggregated data was far from convincing regarding the durability and sustainability of the recovery, with private and government consumption expenditure remaining well below their pre-Covid levels in Q2 FY2022. Subsequently, industrial output grew by a tepid 3.2 per cent in October...