INDIAN GDP 2020

 

The National Statistical Office (NSO) has put out the figures Q1FY21. The Q1FY21 GDP is at -23.9%

National Statistical Office (NSO) has put out the figures Q1FY21. The Q1FY21 GDP is  at -23.9%. This data reveals this worst contraction on record.

The “Real GDP growth at (-)23.9% in 1QFY21 was much lower than what markets were expecting. The print indicates that the trough in the economy was much lower than expected and the pickup will likely be more elongated. Production side was pulled down by deep contraction in manufacturing, construction, and trade, hotel, transport sectors while the expenditure side was clearly pushed lower by heavy contraction both in consumption and investment. Going forward, given the gradual improvement in activity indicators (remaining well below pre-Covid levels) the growth recovery will be gradual and contracting for all quarters in FY2021. Further, growth recovery will also be hinged to the curb of the Covid spread and removal of even localized lockdowns. The choice for the government will be on whether the consumption or the investment side needs to be pushed. Given the limited fiscal space and the need to stimulate a more durable growth, the growth recovery will be gradual and is likely to continue into 1HFY22.”

    “The growth rate for April to June quarter was expected to be bad but it turned out worse, a degrowth by 23.9% is worse than the most bearish estimate. Positive agricultural output is the only positive element in the GDP print. As the April-June quarter saw the maximum period of the national lockdown the degrowth was severe, going forward as the government re-opens the economy in phases, government spending, and festive season spending is expected to help the growth rate to be in the positive territory going forward. While the RBI has done its part to help boost consumption and economy, a further rate cut may help boost credit offtake. The government may still have some more fire-power with further stimulus measures for specific sectors. Good monsoon, high agri output will help with a pickup in rural consumption. Government spending, reforms, and more measures to boost consumption is required to bring back growth on track..