Economists Upgrade India’s FY21 GDP Forecast
<span style="font-weight: 400;">FY21 GDP growth contraction now seen shallower between 6% and 8.5%. High-frequency indicators growth are good so far. However, a rise in Covid-19 cases could pose downside risks.</span> <span style="font-weight: 400;">Post better than expected Q2 GDP data, various
Published -
Dec 3, 2020 6:18 AM
FY21 GDP growth contraction now seen shallower between 6% and 8.5%. High-frequency indicators growth are good so far. However, a rise in Covid-19 cases could pose downside risks. Post better than expected Q2 GDP data, various economists have upgraded FY21 GDP growth forecasts. India economy is expected to contract around 6% to 8.5% in FY21 as compared to earlier expectation of contraction of 7-16% by various economists. Nomura sees India's FY21 GDP to contract 8.2% versus their earlier expectation of contraction of 10.8%. The rebound was led by fixed investment, agriculture and Industry GVA. Recovery is uneven with services sector lagging industry and there is risk of sequential slowdown due to resurgence of rising covid cases. CARE Ratings sees FY21 growth at -7.9% (vs -16% odd earlier), ICICI securities at -6.4% (vs -7% earlier) and Axis capital at -6% (vs -10.3% earlier).High frequency indicators do paint a slightly mixed picture, but the growth trend is good so far. October core sector data is back to volatile territory with October print at -2.5% as compared to -0.1% in September last month. India's November manufacturing PMI despite being strong, slipped to 3 month low at 56.3. Gross GST revenue collections in November at Rs 104963 crore sustained above Rs 1 lakh crore for the second month in a row. Most high-frequency indicators do show recovery so far. However, it needs to be watched if the trend will sustain as there could be some moderation in demand post the recent festive season. The RBI, CEA and various economists have cautioned about on the downside risks that could emerge due to rising Covid-19 cases. While the Covid-19 pandemic has peaked in mid-September, winter months warrant caution as the second wave of the Spanish flu pandemic was quite intense. He said that the current economic conditions reflect the impact of the pandemic and hence sustainability of the economic recovery depends on the pandemic and we must follow all the Covid-19 related protocols. Post Q2 focus would also be on RBI policy meet this week. Nomura highlights that high inflation cements the case for monetary policy pause and now expect RBI to stay on hold through 2021 versus their earlier expectation of rate cut of 50bps.