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NEW DELHI: The GDP data for the June quarter of FY21 to be released today evening would reveal the extent of damage the coronavirus pandemic has caused to the Indian economy. While India’s economy had been slowing down well before the pandemic hit it, Asia’s third largest economy is expected to fall into a recession in FY21 for the first time in 40 years.
Here is a look at five things you should look for in the upcoming GDP data:
- Headline GDP print
While there is consensus that GDP is set to contract in June quarter, there is wide variation among forecasters on the extent of contraction Indian economy went through due to the strictest lockdown in the world. While Nomura projects GDP to contract 15.2%, Barclays has estimated the economy to slump 25.5% during the first three months of the current financial year.
2. Manufacturing slump
Manufacturing sector is expected to have been the worst hit during the first three months of the financial year with nationwide lockdown forcing factories to shut shop due to non-availability of labourers. Broken supply chains further lingered the problem even in June when the centre gradually lifted mobility curbs. While the Index of Industrial Production (IIP) contracted 36% in June quarter, manufacturing GDP which measures value addition may also see massive contraction.
3. Dual shock
Coronavirus triggered a dual shock in the economy both from supply and demand side. Capital goods, signifying investment demand in the economy, shrank for the 18th month in a row in June. This could reflect in the Gross Fixed Capital Formation representing investment activity in the GDP data for June quarter which has been contracting for the preceding three quarters. Private consumption demand which have been holding positive till March quarter may see massive decline in June quarter as the pandemic induced mobility restrictions forced consumers to stay at home while income losses forced consumers to cut down their discretionary spending.
4. Agriculture, the bright spot
Farm sector is considered to become the only silver lining in the GDP numbers which may record a positive growth with robust rabi production and crop area sown in the ongoing Kharif season witnessing positive growth aided by good South-West monsoon rainfall. However, agriculture sector with only 18% contribution to GDP is unlikely to salvage a deeper contraction in industry and service sectors.
5. Government support
Despite massive drop in revenue collections, the centre maintained its pace of its public expenditure during the June quarter by raising its borrowing programme. Total expenditure during April-June period was marginally higher (26.8%) than the same period a year ago (25.9%) following the announcement of the Garib Kalyan Yojna through which government provided support to the vulnerable sections of the society. This may provide some support to the GDP numbers with “Public Administration, Defence and Other Services” expected to show positive growth.
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