GDP to be in growth territory in Oct-Dec, signifies exit from COVID-induced recession, says ICRA report

Private consumption and government spending will help the economy post a turnaround during the December quarter and the GDP will grow 0.7 percent, the ratings agency said

Press Trust of India February 16, 2021 17:17:32 IST
GDP to be in growth territory in Oct-Dec, signifies exit from COVID-induced recession, says ICRA report

Representational image.

Mumbai: After two consecutive quarters of contraction, India's GDP is set to revert to the growth territory in the October-December 2020 period compared to the year-ago period, according to a report.

Private consumption and government spending will help the economy post a turnaround during the December quarter and the GDP will grow 0.7 percent, ICRA Ratings said in a report on Tuesday.

The economy contracted almost by a fourth in the June quarter and by 7.5 percent in the September quarter in the current fiscal. Even as a recovery is underway, official estimates peg the FY21 contraction at 7.7 percent.

It can be noted that the economic growth has been on a downward spiral for over three years till it went into a contraction mode.

"The forecasted growth in Q3 FY21 while undoubtedly mild and uneven is nevertheless welcome as it signifies that the economy has exited the COVID-19 pandemic-induced recession after two tumultuous quarters," the rating agency said.

Its principal economist Aditi Nayar said the revival in Central Government spending supported the Indian economy's exit from the recession in Q3 FY21 and pointed out that after a decline of 14.2 percent in Q2FY21, the Government of India's (GoI's) non-interest revenue expenditure rose by 22.9 percent in Q3 FY21.

She said almost all the non-agricultural lead indicators tracked by the agency recorded a continued, albeit uneven, improvement in volume terms in the December quarter on continued unlocking of the economy, an uptick in consumption during the festive season, and Central Government spending.

According to Nayar, most of the tracked indicators rebounded to a growth on a year-on-year basis in the December quarter although this was on the low base of Q3 FY20, and that aviation was among the outlier which continued to contract.

The agency said the Index of Industrial Production recorded a "sedate 1.0 percent rise" for the same quarter while rising raw material prices contributed to lower margins in some sectors. However, the profitability for a large portion of the formal listed space remained healthy, benefitting from the cost-cutting measures that had been undertaken at the peak of the pandemic as well as rising volumes.

Further, Nayar said the formal part of the Indian economy has shrugged off the pandemic blues and is gaining traction at the cost of the smaller and less formal segment, which is hastening the process of the formalization and also contributing to consolidation in favour of the larger players.

In what the agency termed as a "sobering note", it said the January 2021 round of the Reserve Bank of India's Consumer Confidence Survey of respondents in 13 major cities indicated only a modest pickup in consumer sentiments, which it called as an outcome of the weaker recovery in the informal and contact-intensive sectors.

Updated Date:

Subscribe to Moneycontrol Pro at ₹499 for the first year. Use code PRO499. Limited period offer. *T&C apply

also read

India's slow COVID-19 vaccination rate puts gains at peril; private sector involvement must to expand coverage
India

India's slow COVID-19 vaccination rate puts gains at peril; private sector involvement must to expand coverage

It is important to reiterate that the argument of 'natural herd immunity' remains largely a thereotical one, and cannot be relied on to mitigate the disease, especially with millions of vaccine doses ready

COVID-19: After a gap of 75 days, Maharashtra reports more than 5,000 new cases
India

COVID-19: After a gap of 75 days, Maharashtra reports more than 5,000 new cases

The state had reported 5,229 infections on 4 December, after which it had been registering a gradual but steady drop in number of new cases

No internet, no vaccine? Lack of internet access limited COVID-19 vaccine availability for some minorities
World

No internet, no vaccine? Lack of internet access limited COVID-19 vaccine availability for some minorities

There was a 154% increase in telehealth visits during the last seven days of March 2020 compared to the same period in 2019.