Hyderabad: After witnessing a record contraction of 23.9 percent in the first quarter of the current fiscal year, the Indian economy is likely to see some bounce-back in the second quarter ended in September 2020. However, experts believe that the growth rate may still remain deep in the negative.
As the Union government prepares to release India’s gross domestic product (GDP) data for the second quarter on Friday, various estimates show that the economy is likely to contract 8-11 percent during the quarter.
Sakshi Gupta, a senior Treasury economist at HDFC Bank, said: “The Q2 FY21 GDP data to be released on Friday is likely to show that the contraction in the economy has slowed down. We expect GDP growth to contract by -9 percent compared to -24 percent in Q1 FY21.”
However, she mentioned that this estimate has been revised upward from the original -12 percent expected earlier. “Given the recent pace of recovery, we have revised our Q2 GDP numbers and see an upside to our annual GDP estimate as well,” Gupta said.
“High-frequency data has shown a pickup in activity for the months of August and September. A part of this was led by reopening of the economy and improvement in mobility. Furthermore, economic activity also got a push from the festive season demand,” she added.
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Gupta noted that agriculture growth is also likely to be a bright spot in this quarter’s release on the back of healthy Kharif output this year.
Prithviraj Srinivas, Chief Economist, Axis Capital Ltd, also sounded optimistic on the pace of economic recovery. “I estimate -8.4 percent growth for September quarter GDP, revised up from -11.2 percent previously,” Srinivas said.
Srinivas noted that the manufacturing sector should drive the uptick as the pent-up demand seen during the second quarter has benefitted goods over services.
“Personal safety and convenience seem to be the root driver of discretionary demand in auto and durables,” he said.
On the outlook for the full fiscal year, Srinivas said that contraction may be less than what was expected earlier. “We see an upside risk to our -10.3 percent full year FY21 forecast, but will revise after the September quarter’s GDP is known.”
HDFC Bank’s Gupta also expects growth figure to turn positive in the December quarter. “We expect economic activity to recover further in Q3, with GDP growth likely to turn positive (at 1 percent) and gain further momentum in Q4 (2.5 percent).”
To recall, the Reserve Bank of India earlier this month said that India’s GDP is estimated to contract by 8.6 percent in the July-September period after a contraction of 23.9 percent in the April-June quarter, according to an Economic Activity Index constructed using 27 high-frequency indicators.
India’s economy probably shrank for a second straight quarter, pushing the country into an unprecedented recession, RBI had said in its first-ever published ‘nowcast’.
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