Fourth Quarter GDP Higher Than Expected But Likely To Be Revised Downward: Experts
India's economy grew 3.1 percent in the January-March quarter compared with the same period last year, the slowest growth in at least eight years, official data showed on Friday, reflecting the partial impact of the COVID-19 pandemic. The read-out for the March quarter was faster than the 2.1 percent forecast of analysts in a Reuters poll but was below a downwardly revised 4.1 percent growth rate for the previous quarter.
Here's what experts said on the numbers:
Anagha Deodhar, Economist, ICICI Securities, Mumbai:
"The sharp downward revision in the previous three quarters' numbers brought full-year growth in FY20 a tad below our expectation. Government expenditure has continued to provide much-needed support to growth, while agriculture growth has come in at an eight-quarter high.
Growth in other key sectors, however, is disappointing. Manufacturing and construction, which are key employment generating sectors, have recorded growth at multi-quarter lows. Core GVA growth (excluding agriculture and public administration) has fallen sharply to 1.2 percent. We believe growth will bottom out in Q1FY21."
Shashank Mendiratta, Economist, IBM, New Delhi:
"The headline GDP data in Q4FY20 looks a tad better than expected. We should also bear in mind the fact that data collection was impaired due to the lockdown in late-March and, as such, there is a possibility that the GDP numbers will be revised lower.
Unsurprisingly, private consumption and investment demand weakened during the quarter. The anticipated slowdown in income growth is expected to cause substantial loss in private consumption going ahead. Although expected, a third straight quarter of contraction in investment demand is worrying and does not bode well for the economy.
On the production side, the only silver lining was the stellar growth in agriculture and public services. Excluding both these, core GVA grew by just 1.1 percent in Q4FY20. Looking ahead, June quarter GDP growth is expected to be worse as indicated by weak mobility trends on account of policies put in place to fight the pandemic. High-frequency indicators also do not portend well."
Abhishek Goenka, Founder & CEO, IFA Global, Mumbai:
"Q4 GDP print came in higher than most economists' estimates at 3.1 percent. On the output front, agriculture and mining sectors seem to have held fort. On the expenditure front, government spending seems to have saved the day.
Private consumption, gross fixed capital formation and net exports have been disappointing. There have been material downward revisions in previous quarters' GDP prints, resulting in GDP growth for FY20 coming in at 4.2 percent.
April core sector data came in at -38.1 percent, the worst print ever. Most of the negativity has already been priced in and markets are braced for a shocker of a GDP print in Q1 FY21 as well.
Going forward, markets are more likely to focus on leading and high-frequency indicators to get a sense of the pace of recovery once restrictions on movement are eased. They would be closely tracked alongside the novel coronavirus cases' curve."
Sakshi Gupta, Senior Economist, HDFC Bank, Gurugram:
"While the Q4 number is higher than our expectations, we expect it to be revised down in subsequent releases as the impact of the lockdown is adequately factored in. The CSO (Central Statistics Office) mentions that the data collection activity was affected due to the lockdown in March.
Going ahead, we expect GDP growth to contract by 4.8 percent in FY21, with a sharp drop of 21 percent in Q1. Supply disruptions and labour shortage issues are likely to linger on. 40 percent of India's GDP comes from currently-identified red zones across states.
Overall, the economy is likely to operate below trend capacity for FY21. Therefore, the recovery process is likely to be a slow grind and we expect the catch up process to pre-COVID-19 levels to take longer than earlier expected."
Madan Sabnavis, Chief Economist, Care Ratings, Mumbai:
"Core sector data was to reveal a negative growth rate in the region of over 30 percent in April which has now come in at -38.1 percent. While an across the board negative number was also expected, the fall of 22.8 percent in electricity is a reflection of the sharp decline in industrial production as the household consumption was higher than normal.
Yet due to the lockdown, industrial and commercial demand had fallen, which gets reflected here.
The fact that labour was in transit camps meant activity in mining got affected. Lower imports of crude oil due to demand coming down meant that refinery products was affected. Cement and steel had both fallen by over 80 percent each due to the shutdown across the country.
The lowest decline in production was fertilizers as production was on to a limited extent given the demand for the sowing of the next crop.
This picture would be replicated in May too though not to this extent. IIP growth, too, would be in a similar range most probably given the high weight of these industries in the index."
