India's GDP contracted 7.5 percent in the second quarter of FY21. Apart from this, India's gross value added stood at minus seven percent for the July-September quarter of FY 2021.
Meanwhile, India's eight core industries growth stood at (-)2.5 percent in October 2020, in comparison to (-)0.8 percent in September 2020. The data showed that the growth in the April-October 2020 in the eight-core
sector was (-)13 percent in comparison to 0.3 percent on a yearly basis.
Also, September 2020's industries growth has been revised to (-)0.1% percent against -0.8% earlier (YoY).
India Q2 GDP contracts 7.5%, but is it still better placed than rest of the world?
As per the Union Ministry of Statistics and Programme Implementation (MoSPI) data, apart from the electricity, agriculture and manufacturing sector, all other sectors' growth contracted. Among the worst affected sector was trade and hotels whose growth contracted by -15.6%.
"The base effect is leading to a positive surprise on some of the numbers. The revival is indicating a V-shaped recovery. Financial, real estate and professional services are among sectors that need to be looked at more closely," CNBC-TV18 quoted Chief Statistician Kshatrapati Shivaji.
Chief Economic Advisor Krishnamurthy Subramanian stated that each of the high frequency indicators were doing well till February until COVID-19 hit. "Services are in an expansionary phase despite travel and transport impacted by the pandemic. India is in expansionary phase both on manufacturing and services, IIP indicates this," K Subramanian said on economic revival.
ICRA's principal economist Aditi Nayar said that the GDP data provided a positive surprise. She said, "The sharper than expected narrowing in the pace of GDP contraction to 7.5% in Q2 FY2021, as compared to our forecast of a 9.5% YoY decline, was primarily driven by manufacturing, electricity and construction, and to a mild extent, agriculture."
Adding more, she said, "Discouragingly, the pace of contraction of two sub-sectors, financial, real estate and professional services, and public administration, defence and other services, actually worsened in Q2 FY2021 relative to the previous quarter, serving as a reminder that the path out of the pandemic may not be smooth."
"India's real GDP declined 7.5% YoY in 2QFY21, better than the consensus but worse than our forecast. While the decline in personal consumption expenditure was in line with our forecast, investments recovered strongly but fiscal spending was extremely weak (the worst ever contraction on new series), said Motilal Oswal's economist Nikhil Gupta.
Care Ratings expects India's GDP to contract by -7.7% to -7.9% in FY21. It said, "GDP growth although expected to improve in the remaining two quarters of 2020-21 with the improved pace of pickup in economic activity across most sectors. The economy however continues to face downward pressured from the sustained spread of the pandemic in the country and the re-imposition of restrictions in various regions. Consumption demand and investments which is necessary to propel the economy would continue to be tepid and is unlikely to seen a noteworthy improvement during the course of the year. We expect the country’s GDP to contract by -7.7% to -7.9% in FY21."
The second-quarter growth expectations were significantly better than that in Q1 with the unlocking mode being on across the country. The government has been relying on some 60 high-frequency indicators to chart the recovery of the economy. A number of officials expect that the economy could be back in positive growth territory by the January-March quarter. The RBI expects contraction of 8.6 percent and a report from the central bank said that India, for the first time may be in a “technical recession” due to two successive quarters of contraction.
State Bank of India (SBI) had revised their Q2 projection to 10.7 percent fall from their previous 12.5 percent, as per SBI Ecowrap; Care Ratings projects 9.9 percent contraction and ICRA estimates it to be 9.5 percent. CRISIL has among the harshest projections of 12 percent contraction in Q2FY21, as it noted that recovery in high-frequency indicators are still below pre-pandemic levels despite some relief from April. Experts CNBC-TV18 spoke to in a poll felt that India's economy was likely to contract by 8.9 percent for the period and concurred with the RBI’s assessment of technical recession.
Most projections were much better than the 23.9 percent slump recorded for Q1FY21 by the Union Ministry of Statistics and Programme Implementation (MoSPI). Economic indicators also point to a recovery, as vehicle sales, real estate PMI and railway freight earnings continue to pick-up – outstripping even 2019 numbers.
Income Tax (I-T) collections in September 2020, for the first time this fiscal exceeded 2019 numbers, while GST collections also crossed Rs 1.05 lakh crore in October and manufacturing PMI rose to 58.9 in October – a decade-long high, due to “robust sales,” according to IHS Markit.
Anticipation for growth in sectors is high as in Q1, only the agriculture sector showed growth (3.4 percent), while other segments were squeezed – Construction (50.3 percent), manufacturing (39.3 percent), mining (23.3 percent) and communication and services, trade and transport (47 percent each).