» Business » Experts say economy to perform better than earlier projections

Experts say economy to perform better than earlier projections

Source: PTI
January 08, 2021 00:21 IST
Get Rediff News in your Inbox:

India's GDP estimates for 2020-21 show that the economy is expected to perform much better than earlier projections by different agencies, indicating a sustained V-shape post-lockdown recovery, experts said.


Illustration: Uttam Ghosh/

The first Advance Estimates (AE) by the National Statistics Office (NSO) has projected a contraction of 7.7 per cent in the real GDP during 2020-21.

This was better than the projections by certain international agencies like the IMF and World Bank.


Commenting on the data, the finance ministry said the estimates on Gross Domestic Product (GDP) suggest a continued resurgence in economic activity in the second half of the current fiscal and point at post-lockdown sustained V-shaped recovery.

"The AE of 2020-21 reflect continued resurgence in economic activity in Q3 and Q4 - which would enable the Indian economy to end the year with a contraction of 7.7 per cent," it said in a statement.

CII Director General Chandrajit Banerjee said the advance estimates show "a much shallower decline than earlier expected".

According to him, the government spending did much of the heavy lifting in supporting growth along with a healthy agriculture performance which was aided by a good monsoon.

In the last few months, there has been a strong economic recovery which will require to be nurtured especially in supporting the critical pillars of consumption to sustain the recovery momentum, he added.

D K Srivastava, Chief Policy Advisor, EY India too said the estimates show much better performance than what was predicted by multilateral agencies such as the IMF and the World Bank at (-) 10.3 per cent and (-) 9.6 per cent, respectively.

Srivastava further said the recovery in public administration, defence and other services is conditional upon central and state governments being able to substantially uplift their expenditures in the last quarter of the fiscal year.

"One clear implication is that the central government may have to incur a larger fiscal deficit than what was earlier announced at Rs 12 lakh crore," Srivastava added.

Anuj Puri, chairman, Anarock Property Consultants, said the present estimates signal more positive trends and that Indian economy is slowly on the road to recovery.

"The rate of contraction has definitely slowed down and there has been visible uptake in economic activity in the recent past especially in the festive season," he said.

Puri said even real estate, which makes a significant contribution to the GDP, is seeing visible signs of recovery with residential sales rising significantly in the festive quarter.

The economy contracted by a massive 23.9 per cent in the first quarter and 7.5 per cent in the second quarter of this fiscal on account of the COVID-19 pandemic.

NSO said in wake of the pandemic, the data challenges in the case of other underlying macroeconomic indicators like the IIP and CPI used in the estimation of National Accounts aggregates, will also have implications on these estimates.

Further, the projected indices may significantly vary from the actual indices which in turn will depend on the pandemic-led economic situation prevalent during those months and specific measures, if any, taken by the government, it said.

Estimates are therefore likely to undergo sharp revisions for the aforesaid causes in due course, as per the release calendar, it added.

Commenting on the data, State Bank of India's research report Ecowrap said, "It's now official.

“Due to the COVID pandemic India will witness negative GDP growth rate for the first time after 1979-80."

"If we juxtapose the data which is available for H1 and look at the FY21 estimates, CSO is expecting some recovery in services sector, with financial, insurance, real estate services leading," it said.

Another good thing is the improvement in the manufacturing sector.

Agriculture, the only sector which displayed positive growth during H1, is expected to stay on positive growth trajectory in the future as well, the report said.

India Ratings and Research Principal Economist Sunil Kumar Sinha said, "Although the headwinds emanating from COVID-19 related challenges are unlikely to go away till mass vaccination becomes a reality, we believe economic agents at least in the non-contact intensive sector appears to be gradually learning to live with it and economic activities are adjusting swiftly to the post COVID-19 world."

The rating agency therefore expects GDP growth to turn positive in the fourth quarter of FY21 and FY22 GDP expansion to come in at 9.6 per cent.

Care Ratings, in a report, said CSO's first advance estimate of GDP growth for FY21 is in line with its forecast of (-) 7.7-7.9 per cent.

It expects marginally negative growth in Q3 and positive growth in Q4. Consumption and investment growth are negative for the year, it added.

Get Rediff News in your Inbox:
Source: PTI© Copyright 2021 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.

Moneywiz Live!