HomeBusiness NewsSlow but Sure: Q3FY21 GDP seen in positive territory

Slow but Sure: Q3FY21 GDP seen in positive territory

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Businesses in tier 2 & 3 cities witnessing faster recovery than in tier 1By Rohit Vaid (IANS) Healthy festive season sales along with low base and high corporate savings are expected to lift India out of the technical recession spiral in Q3FY21.

Besides, healthy performance of the agricultural sector as well as a lagged recovery in contact-intensive parts of the services sector such as aviation and hospitality are expected to give an upward push to the GDP growth rate.

A poll of economists and industry experts conducted by IANS showed that majority of them expect a flat-to-positive growth in GDP during Q3FY21.

Consequently, even with a minute growth, India would have exited the recessionary phase, even though the long-term impact of the pandemic will still to hamper the growth.

“We expect India’s GDP to grow by 0.7 per cent in Q3FY21, indicating an end to the recession. Festive sales, government spending and a low base aided the exit from the recession,” said Aditi Nayar, Principal Economist, ICRA.

In financial parlance, an economy is said to have entered a technical recession after it consistently remains in the negative output territory for two subsequent quarters. This trend underscores the reduction in purchasing power along with lower tax collection for the government, likely defaults on debt and falling Capex spends.

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“Strong corporate earnings and pickup in other lead activity indicators should support a sequential recovery in growth, implying that the GDP will likely be back in the positive territory by Q3FY21,” said Madhavi Arora, Lead Economist, Emkay Global.

In November 2020, the data furnished by the National Statistical Office (NSO) showed that the Q2FY21 GDP, on a year-on-year basis, contracted by 7.5 per cent from (-) 23.9 per cent in the preceding quarter.

Though not comparable, the GDP had grown by 4.4 per cent in the corresponding quarter of FY2019-20.

“With many high frequency indicators in the economy close to the earlier levels, we expect a marginal growth of 0-1 per cent in Q3FY21. The replenishment of inventories post the festive season is also an indication of potential demand revival,” said Suman Chowdhury, Chief Analytical Officer, Acuite Ratings & Research.

Furthermore, ICRA pointed out that an expected revival in exports and a rise in government spending will contribute to the expected mild growth.

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However, Sunil Sinha, Principal Economist, India Ratings and Research, said: “The scar of the Covid-19 pandemic and the lockdown on the economy, although subsiding, will continue to impact the normalisation of economic activities in the contact-intensive sectors till mass vaccination or herd immunity becomes a reality. India Ratings’ estimate shows GDP growth will continue to record negative growth till Q3FY21. However, it will turn positive at 0.3 per cent in Q4FY21.”

According to Brickwork Ratings’ Chief Economic Advisor M. Govinda Rao: “Our own projection is that the contraction will continue at (-) 2 per cent in Q3FY21, although at a lower rate compared to the first two quarters of FY21. We expect GDP growth likely to turn positive in Q4FY21 at 5 per cent, largely due to continued recovery and partly due to the base effect of lower growth of 3.1 per cent in Q4FY20.”

(Rohit Vaid can be contacted at [email protected])

Source: IANS

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