Will India’s GDP turn positive by Q4FY21? Here’s what analysts say

The economic outlook has improved with the Q2 gross domestic product (GDP) print, which indicates faster normalisation of the activities during the quarter with a stronger than expected pickup.

Overall, India’s economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent. The GDP had contracted by a record 23.9 per cent in the first quarter of 2020-21 fiscal (April 2020 to March 2021) as the coronavirus lockdown badly hit the economic activity.

Commenting on the figures, market watchers said that the GDP print was better than expected. However, sustainability is the key, especially after the festive season.

Here what economists and market experts said on the GDP figures:

Mihir Vora, Director & Chief Investment Officer, Max Life Insurance

India marked a technical recession with a Q2 real GDP contraction of -7.5 per cent and nominal GDP at -4 per cent. The number is marginally better than expectations and reflected unlocking of the economy, improvement in activity levels and pent-up demand. The number also may look higher as the initial estimates take into account data for larger companies, which have done better than the medium and small enterprises. The revised numbers including smaller company data may be a notch lower, but these will be available only after a few quarters.

Rural sector remained the bright spot. Good improvement in manufacturing was also a positive. On the expenditure side, as a proportion of GDP, private consumption as well as investments remained lower than pre-Covid levels.

With the government spending likely to improve in H2FY21, we believe further improvement in growth numbers would be seen. We expect Q3 GDP at -1.5 to -2 per cent whereas Q4 growth may be marginally positive if there are no further Covid-induced lockdowns.

S Ranganathan, Head of Research, LKP Securities

The contraction in GDP at 7.5 per cent in Q2 was ahead of the market expectation, which was going in with a contraction of 9 per cent. Two-wheeler demand was robust and so was the cement demand. The data is in sync with the Q2 earnings and the commentary put out by several corporates.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services

The 0.6 per cent expansion in manufacturing has come as a pleasant surprise. If this trend sustains, Q3 contraction will be very low and Q4 will post positive figures. If so, the annual contraction can be around 6 per cent. Sharp expansion in the first half of FY22 is on the cards. A ‘V’ shaped recovery in FY22 is in the realm of possibility. It is important to sustain the growth momentum.

B Gopkumar, MD & CEO, Axis Securities

September GDP print beat the market expectation with recovery in manufacturing that drives improvement in Q2, with a decent improvement seen in services. The agriculture sector continues to stand out during the quarter on better Kharif output. The growth outlook has improved with the Q2 GDP print. Now the market will look for sustainability of demand, especially after the festive season, and will be watchful of the high-frequency indicators.

Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research

The significantly lower YoY contraction in Q2 GDP at 7.5 per cent compared with 23.9 per cent in Q1 has been largely in line with our expectations given the effect of pent up demand in the economy after a protracted lockdown in large parts of the country. Going forward, however, we believe that the revival momentum in Q3 and Q4 will be critically dependent on the pickup in private consumption during the festive season and a reduction in the intensity of the Covid pandemic. Any further resurgence of the pandemic and delay in the introduction of vaccines may constrain the expected GDP growth in Q3 and Q4.

Binod Modi, Head – Strategy, Reliance Securities

Better-than-expected GDP print is mainly supported by a strong rebound in manufacturing. While the 2QFY21 GDP print marks a sharp sequential rebound, the market will be focusing more about the prospects of recovery in 2HFY21. Given a 2.5 per cent drop in Core Industries output for Oct 2020 and a sharp 13 per cent drop in consumptions (private + govt) in 2QFY21, a meaningful recovery in Q3 FY21 looks to be doubtful. We note that consumptions have always played an important role over the years to support economic growth. Hence, a faster recovery in consumptions is utmost important.

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