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Experts See K-Shaped Recovery As GDP Grows 0.4% In December Quarter – Unblendednews

Experts See K-Shaped Recovery As GDP Grows 0.4% In December Quarter


Experts See K-Shaped Recovery As GDP Grows 0.4% In December Quarter

Experts say that the GDP growth in the third quarter was slightly lesser than expected

The economy expanded by 0.4 per cent year-on-year in the October-December quarter, returning to growth after shrinking for two straight quarters, government data showed on Friday. The readout for the December quarter was a tad lower than the 0.5 per cent growth forecast of analysts in a Reuters poll. (Also Read: India Exits Recession With 0.4% Quarterly Growth )

Shashank Mendiratta, Economist, IBM, New Delhi

“GDP growth returned to positive territory after contracting for two successive quarters. At component level, investment GDP recorded its first growth since December 2019. This recovery in investment is likely driven by capex spending.

Weakness in private consumption also eased markedly during the quarter, even as it continued to show a contraction. Consumption of durable goods has picked up following the lifting of lockdown, while those of services continue to weigh on private spending. 

Demand for contact intensive sectors will likely improve gradually as consumers regain confidence. While growth has returned to positive, the momentum would need to improve further for a sustained return to pre-COVID output levels.”

Kunal Kundu, India Economist, Societe Generale, Bengaluru

“The Indian economy has turned a corner during 4Q20, growing by 0.4 per cent yoy, slightly lower than the consensus expectation, though we expected one final quarter of contraction. 

To us, the data appears to be at variance with the high frequency data. Disaggregated data shows that domestic consumption continued to contract while real government spending dipped too, albeit marginally. 

A sharp pick-up in investment enabled the economy to record a marginally positive growth as did a lower trade deficit on account of less-than-robust economic activity. Going forward, we believe that investment and not consumption will be India’s growth driver.”

Rupa Rege Nitsure, Group Chief Economist, L&t Financial Holdings, Mumbai

“India’s GDP data for Q3 tells the same story, which many other nations are witnessing. Economic growth has turned positive for several countries in the Oct-Dec quarter, partly attributed to the policy stimulus and partly to the optimism created by COVID-19 vaccination. However, India’s GDP growth is lowly positive in Q3 as the stresses continue in mining, manufacturing & services sectors. 

Indian growth during the pandemic is primarily supported by agriculture, construction activities and the Government’s Capex spending. Consumption spending continues to stay weak both for the private and public sectors.”

Siddhartha Sanyal, Chief Economist And Head Of Research, Bandhan Bank, Kolkata

“The 0.4% y/y growth in real GDP is broadly in line with Street expectations and is significantly stronger than the GDP prints witnessed during the previous two quarters. The current print will likely further boost the expectation of a 7%-8% y/y contraction in real GDP during FY21.

Furthermore, while expectations of GDP growth during FY22 remain strong, partly reflecting a markedly favourable base, one needs to note that the path for sequential growth can still be uneven and uncertain. Given the uncertainties around investments and exports, recovery prospects currently hinge critically on an uptick in private consumption. 

Accordingly, one would expect support from public policy – both fiscal and monetary – will remain strong in the coming months.”

Sakshi Gupta, Senior Economist, Hdfc Bank, Gurugram

“Q3 GDP was slightly lower than expectations, albeit showed that the economy did move into the green. Going ahead, we are likely to see a continuation of a K-shaped recovery with some sectors growing faster than others.

We expect growth to print at 1.5% in Q4 and -7.5% for the whole year FY21. We expect GDP for FY22 at 11.5%. We expect the economy to reach pre-pandemic output levels by the end of the calendar year 2021.

That said, there are some risks that need to be watched out including rising commodity prices, slow global recovery, and the pace of recovery in the informal sector and contact intensive services with the resurgence of domestic cases.”

Prithviraj Srinivas, Chief Economist, Axis Capital, Mumbai

“Headline Dec-quarter GDP was a mixed bag with GVA (gross value added) growth +1% YoY coming close to our estimate, although some of the internals in the data were underwhelming. Having said that, the outcome is not entirely negative considering downward revisions for previous quarters.

These numbers will surely get revised further given this is an exceptional year. The GDP data confirms sharp activity uptick in Dec quarter and positive YoY growth one quarter ahead of earlier expectations. 

High frequency indicators in January and February show that activity levels have stabilized post Dec quarter therefore continued growth momentum. However, we haven’t overcome the health crisis as yet and hence policy will continue to lean towards supporting growth.”  


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