GDP Q1: What is expected for August 31?

The MoSPI (Ministry of Statistics and Programme Implementation) is supposed to announce the initial official estimates of GDP for Q1 (April-June) of 2020-2021 on August 31.

Experts speculate the year-on-year contraction of GDP growth could be from 16%-25%. This could be the worst news since independence and is expected to be the first negative GDP growth since the 1990s.

As per Ind-Ra (India Ratings and Research), negative growth is expected to be around 17.03%.

The results for the next three quarters are expected to be better than Q1 results.

What is the reason of sliding GDP?

The global pandemic has costed so many lives around the world and has infected numerous people, in order to contain this pandemic governments from all around the world started imposing lockdowns due to which entire economy came to a point of standstill (other than essential commodities).

The sectors like manufacturing, construction, trade, hotels, transport and communication were shut down whose impact was directly seen on the economy as they are charge for 45% of our GDP.

What is being expected?

“We expect the manufacturing GVA (Gross Value Added) to contract by 40-45 percent in Q1 FY2021,” mentioned Aditi Nayar Principal Economist, ICRA (Investment Information and Credit Rating Agency of India Limited).

In addition, Aditi Nayar further vocalized, “driven by the healthy rabi harvest, we expect the growth of agriculture, forestry, and fishing to rise to 5.0 per cent in Q1 FY2021 from 3.0 per cent in Q1 FY2020,”

“The revenue expenditure of a small set of state governments for which data is available, expanded by 18.5 per cent in Q1 FY2021. This, coupled with the 9.7 per cent growth in the government’s non-interest revenue expenditure in Q1 FY2021, would support the overall economic performance in that quarter,” stated ICRA.

“Manufacturing is likely to witness the sharpest slowdown, followed by services based on high frequency indicators. On the other hand, the only support to growth is likely to come from the agricultural sector that was relatively insulated from the impact of the virus. We estimate that the contraction in GDP would be close to 25%, if we exclude agricultural activity in Q1 FY2021,” was announced by Abheek Barua, chief economist at HDFC Bank.

“In principle, revenue decline of listed companies has been far outstripped by cost rationalization, thereby not impacting margins. As per our estimates, Q1 FY21 real GDP de-growth would be now around –16.5%,” mentioned SBI (State Bank of India)

“We believe that the pandemic is likely to have hurt the informal sector more acutely as it comprises smaller firms with limited economic buffers to withstand shocks. And if formal sector data is taken to proxy informal activity at such a time, GDP can potentially be overestimated. The statistics office could announce GDP contraction of 17.5%, which could subsequently be revised to a 25% contraction when the informal sector survey is available,” as stated by Pranjul Bhandari, the chief India economist at HSBC.


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