India's status as world's fastest growing major economy to be short-lived: Reuters poll

MUMBAI, Aug 29 (Reuters): The Indian rupee dropped to an all-time low versus the dollar on Monday on bets the Federal Reserve will keep a restrictive stance for longer, prompting the Reserve Bank of India to step in.
The rupee closed at 79.9625 per US dollar, down from 79.8650 in the previous session.
The local currency had dropped to a record low 80.12 earlier in the day before the RBI sold the dollar to boost the rupee. The intervention by the Indian central bank was confirmed by three traders to Reuters.
"The underlying tone for rupee is weak based on global tightening phase," said Arnob Biswas, head research at SMS Global Securities. He reckoned that it was possible that the RBI may not intervene a lot and could allow the rupee to fall in the face of broad dollar strength.
The dollar index climbed to its highest level in 20 years, boosted by higher short-term U.S. yields and risk aversion. Fed Chair Jerome Powell said restoring price stability will likely require maintaining a restrictive policy stance "for some time", seemingly pushing back against expectations that the U.S. central bank could cut rates later next year. Report from Bengaluru adds: India likely recorded strong double-digit economic growth in the last quarter but economists polled by Reuters expected the pace to more than halve this quarter and slow further toward the end of the year as interest rates rise.
Asia's third-largest economy is grappling with persistently high unemployment and inflation, which has been running above the top of the Reserve Bank of India's tolerance band all year and is set to do so for the rest of 2022.
Growth this quarter is predicted to slow sharply to an annual 6.2% from a median forecast of 15.2% in Q2, supported mainly by statistical comparisons with a year ago rather than new momentum, before decelerating further to 4.5% in October-December.
The median expectation for 2022 growth was 7.2%, according to an Aug. 22-26 Reuters poll, but economists said that the solid growth rate masks how rapidly the economy was expected to slow in coming months.
"Even as India remains the fastest-growing major economy, domestic consumption will perhaps not be strong enough to drive growth further as unemployment remains high and real wages are at a record low level," said Kunal Kundu, India economist at Societe Generale.
"By supporting growth through investment, the government has only fired on one engine while forgetting about the impetus which domestic consumption provides. This is why India's growth is still below its pre-pandemic trend."
The economy has not grown fast enough to accommodate some 12 million people joining the labour force each year.