A number of experts and analysts have revised upwards their projections for the gross domestic product (GDP) growth for FY 2020-21 after GDP growth figures for July-September quarter beat market expectations by posting a contraction of 7.5 percent for Q2 against a 23.9 percent contraction in the first quarter.
The Indian economy would continue to contract for the year but experts believe it would be less pronounced than what was projected earlier. Care Ratings, which had earlier projected a contraction of 8.2 percent for FY 2021, revised its projection to a contraction of 7.7-7.9 percent. Nomura which had earlier projected that India would see a contraction of 10.8 percent this fiscal revised its projection to a contraction of 8.2 percent.
From an earlier 11 percent contraction, ICRA revised their projection to a contraction in the range of 7-9 percent. However, Motilal Oswal has projected that the economy will contract 7.5 percent, from the earlier projected 6.5 percent.
According to experts, that result of policy decisions like timely unlocking of the economy, pitch for self-reliance, and relief measures for various sectors have yielded desired results quicker than expected.
The Indian economy officially entered a technical recession, with two consecutive quarters of negative growth in GDP. Real GDP for the September quarter contracted 7.5 percent year-on-year, on the back of the steep contraction in manufacturing, construction, and services, data released by the National Statistical Office showed on November 27.
Manufacturing entered positive terrain with a growth of 0.6 percent in July-September of 2020-21, against a contraction of 0.6 percent in the same period a year ago. Manufacturing had contracted 39.3 percent in the April-June quarter of the current fiscal.
A combination of pent up and festive demand expectedly played a role in pushing up demand and the manufacturing sector geared itself up by building inventory through the months of August and September. But experts pointed out that manufacturing growth came on the back of a low base, as second quarter of FY20 GDP had witnessed a contraction of 0.6 percent.
With the number of confirmed COVID-19 cases rising once again, the government too advised cautious optimism. “We should be cautiously optimistic. Caution is warranted because the economic impact is primarily due to the COVID-19 pandemic,” Chief Economic Advisor Krishnamurthy Subramanian said after the release of GDP data.