On November 27, the official data of the Gross Domestic Product (GDP) for Q2 2020-21 (i.e. July-September 2020) will be out. After witnessing a massive dip in the economy during the lockdown months, India’s economy is gradually improving. The data released by the National Statistics Office will reveal how much improvement has happened!
During the April-June quarter of the current fiscal year, India’s GDP saw a sharp dip of 23.9 percent. This was mainly the months when India observed a nationwide lockdown due to the Coronavirus pandemic.
In the first quarter of 2020-21, all the segments were red. This included manufacturing, mining, and construction. These sectors saw a contraction of 39.3 percent, 23.3 percent, and 50.3 percent respectively. Moreover, trade, transport, communication, and related services shrank by 47 percent. On the brighter side, the agriculture sector saw a 3.4 percent growth during that quarter.
Many high-frequency indicators have shown moderate signs of a pick up since then. This has hinted towards an overall economic recovery of India. Furthermore, indicators like vehicle sales, real estate, manufacturing PMI, and railway freight earnings have overtaken September 2019.
This also marks the first time in the year when income tax collections in September 2020 have surpassed the collections made in the same month a year ago. Additionally, the goods and services tax (GST) collections surpassed Rs. 1.05 lakh crore in October.
Economists predict a dip in contraction of GDP growth in the quarter July-September
In October, the IHS Markit Manufacturing PMI rose to 58.9. This is the peak rise in PMI in over a decade. In September, the PMI rose to 56.8 thanks to robust sales. State Bank of India (SBI) predicted their second-quarter GDP to contract by 10.7 percent. This comes after they predicted a contraction of 12.5 percent earlier as per an SBI Ecowrap research report.
The Reserve Bank of India (RBI) said that the Indian economy may already have entered a technical recession. This is owing to two successive quarters of contraction. According to the Central Bank, a contraction of 8.6 percent is seen in the July-September quarter.
A team of economists including RBI’s Deputy Governor Michael Patra said, “India has entered a technical recession in the first half of 2020-21 for the first time in history with Q2, 2020-21 likely to record the second consecutive quarter of GDP contraction.”
On the other hand, Care Ratings have predicted a contraction of 9.9 percent in July-September. Rating agency ICRA estimated a 9.5 percent contraction in the GDP.
The government is depending on around 60 high-frequency indicators to tabulate Indian economical recovery. Many experts predict that the economy could observe positive growth by the fourth quarter of 2020-21 (i.e. January-March 2021).
All these predictions will finally be put to test on Friday, November 27.