India’s GDP Growth To Improve In March Quarter? Key Indicators To Watch

India's GDP Growth Likely To Improve In March Quarter? Key Indicators To Watch
Q4 GDP Data Preview: The COVID-19 pandemic may worsen the job crisis scenario in the country next year

GDP Growth: According to estimates by leading rating agencies and economists, the economy may have grown in the January-March quarter of the financial year 2020-21. For the fourth quarter of fiscal 2020-21, agencies and research reports have suggested that the gross domestic product (GDP) grew in the range of 0.5-2.3 percent, while the economy could record a contraction between 7-8 percent in the entire fiscal year.

However, the country’s economic outlook for the entire fiscal year has weakened, with forecasts suggesting that the impact of the COVID-19 pandemic could be much deeper, and the job crisis may worsen in the coming year. The May 20-27 poll conducted by news agency Reuters with 29 economists, showed that the economic outlook was lowered to 9.8 per cent on average for this fiscal year, down from 23.0 per cent and 10.4 per cent respectively a month ago. 

The consensus indicated healthy growth figures later this year, however, all economists warned the outlook is either ‘weak and prone to further downgrades’ or ‘fragile, with a limited downside.’ None of the analysts expect a ‘strong recovery, followed by an upgrade’. Sensex, Nifty Likely To Have A Positive Opening

The National Statistical Office (NSO) will release the GDP growth estimates for the fourth quarter (January-March) 2020-21, as well as the provisional annual estimates for the year 2020-21 on Monday, May 31, 2021. 

GDP Growth Estimates For Fiscal 2020-21

1. Leading domestic credit rating agency ICRA pegged the GDP growth for the March quarter at around two per cent, and indicated that the economy could register a contraction of around 7.3 per cent for the entire fiscal 2020-21. The agency’s growth projection is higher than the eight per cent contraction pegged by the National Statistical Office.

  • ​Aditi Nayar, Chief Economist, ICRA explained that the better-than-expected numbers are attributed to the widespread recovery in volumes from the low base driven by the COVID-19 nationwide lockdown observed in March 2020. Gold Price Today: Yellow Metal Smashes Rs 49,000 Mark: Should You Buy?
  • According to Nayar, the gross value added (GVA) growth in the March quarter, relative to the third quarter, will be driven by the industry (growth of 4.8 percent compared to 2.7 percent) and services (growth of 2.7 percent compared to a contraction of one percent) sectors. 

2. The State Bank of India (SBI), in its recent research report titled ‘SBI Ecowrap’, pegged the GDP growth for the March quarter at 1.3 per cent, with a downward bias. The state-run bank expects the GDP decline for the full fiscal year 2020-21 to be around 7.3 per cent, compared to the earlier prediction of a 7.4 per cent contraction. 

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Meanwhile, the Reserve Bank of India (RBI) Governor-led Shaktikanta Das Monetary Policy Committee, in its first bi-monthly monetary policy review for the new fiscal year 2021-22, retained its GDP growth projection at 10.5 per cent for the current fiscal

Rate of unemployment due to COVID-19

Reflecting the impact of the economic slowdown, the country’s unemployment rate soared to a near one-year-high of 14.73 per cent in the week ending May 23, according to the Center for Monitoring Indian Economy (CMIE). More than 85 per cent of economists who participated in the Reuters poll, stated that the unemployment situation in India could worsen over the coming year. 

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Prakash Sakpal, Senior Asia Economist, ING said that there will be a significant demand shock to the economy, and some of that could lead to permanent demand destruction, pushing more people out of the jobs market, keeping the unemployment rate elevated over the coming year.

Rate of Inflation 

The Reserve Bank, in its bi-monthly monetary policy review on April 7, 2021, maintained its status quo on the key policy rates for the fifth time in a row. To control the impact of the COVID-19 pandemic on the economy, the central bank is likely to maintain its accommodative stance as long as necessary this year, in order to sustain growth on a durable basis. 

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The central bank targeted the retail inflation at 5.2 per cent in the first half of the current fiscal 2021-22, and mandated to keep it within the range of two per cent – six per cent band with four per cent as a medium-term target. The RBI tracks the retail inflation – or the rate of increase in consumer prices as determined by the consumer price index. 

According to government data, the retail inflation eased to a three-month low of 4.29 percent in April 2021, being well within the Reserve Bank of India’s comfort zone of two percent – six percent, for the fifth straight month.

Earlier quarters of fiscal 2020-21

  • In the third quarter (October-December), the economy snapped out of technical recession and expanded by 0.4 percent, after reporting de-growth in its earlier two quarters, back-to-back, amid the pandemic. 
  • Last year, the GDP contracted by a record 23.9 percent in the first quarter (April- June) of fiscal 2020-21, as an impact of the first pandemic-led nationwide lockdown. 
  • The GDP contracted by 7.5 percent in the second quarter (July-September) of the fiscal year 2020-21. In the second quarter, the country slipped into a technical recession as the GDP fell for two successive quarters.

(This story has not been edited by NEWSUP18 and is auto-generated from a syndicated feed.)

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