We are confident that the recovery will be much faster in Q3 due to the government’s stimulus packages. We expect the growth in GDP to turn positive from Q4, considering that the vaccine is around the corner. We expect the government to continue reforms in the forthcoming Union Budget that will further strengthen our economy and resolve towards Atmanirbar. — Arjun Ranga, Managing Director, Cycle Pure Agarbathi.
The government has received Rs 7.08 lakh crore, which is 31.54 per cent of corresponding BE 2020-21 of total receipts, up to October, 2020. It comprises of Rs 5.75 lakh crore tax revenue, Rs 1.16 lakh crore of non-tax revenue, and Rs 16,397 crore of non-debt capital receipts.
The output of core industries shrank 2.5 per cent in October, against a fall of 0.8 per cent in the previous month.
GST collections were marginally higher for the period August-October at Rs 2.87 lakh crore as against Rs 2.85 lakh crore in FY20. Hence overall consumption has shown signs of coming back to the pre-covid levels in the last three months.
Various economic indicators give an indication that things are better but there are issues in interpretation. For example, the PMI increasing only reflects that the companies surveyed feel they are better off in a month relative to the previous month, which is to be expected as the economy opened up. Year-on-year growth numbers would tend to be lower, but they do not capture the essence of things looking better progressively compared with the previous months. — Care Ratings
India could well be the slowest-growing economy, among a list of 24 countries, in the July-September quarter. This is according to Q2FY21 gross domestic product (GDP) provisional data from various agencies.
With the economy reviving and recovering due to relaxation in Covid-19 lockdown restrictions, we can expect more growth in Quarter 3 of the current fiscal year. The festive season will also a big reason why there will be a recovery in Q3 as sectors such as automobile, real estate, and consumer durables saw a steady and big increase in their revenues. — Prateek Rathee, Real Estate Developer and Founder & CEO of Homezop
During April-June, the manufacturing sector shrank by 39.3 per cent, and the services sector by 20.6 per cent. On the other hand, the agriculture sector was the only area that witnessed positive growth of 3.4 per cent in the quarter.
India’s GDP dramatically had collapsed during the lockdown quarter and had contracted by 23.9 per cent on-year in April-June, as was widely expected. The fall in India’s GDP in fiscal first quarter was greater than expected. A Bloomberg poll of economists had pegged a 19.2% on-year fall in India’s GDP in Q1.
Economists polled by Reuters predicted that India’s economy shrank 8.8% in the quarter ending in September. They expect GDP to also fall in the October to December quarter, followed by a 0.5% expansion between January to March.
According to median estimates of 30 economists polled by Bloomberg, GDP is estimated to contract by 8.2% in the second quarter, while gross value added is expected to contract by 7.6%.
Most emerging Asian stock markets ticked higher on Friday in thin trade as upbeat economic data from China boosted hopes of a swift rebound in the region in the months ahead, while Indian equities were flat ahead of GDP data. — Reuters
Q2 GDP results are scheduled to be released at 5:30 pm today. The GVA growth data about sectoral growth in manufacturing, services, and agriculture sectors will further give a clear picture about India’s path of economic recovery post-pandemic.
The road ahead for the Indian banks is likely to be troublesome as the stressed assets may shoot up in the medium-term. Banks’ non-performing assets may rise to 11 per cent of gross loans in the next 12-18 months, from 8 per cent on June 30, 2020. Read full story here
Moody’s Investors Service has revised its GDP projection for India in 2020-21 to a 10.6% contraction, compared to a 11.5% drop it had estimated. The rating agency has also marginally elevated its forecast for 2021-22 GDP growth from 10.6% to 10.8%. Consumer confidence in India remains relatively low amid a continued elevated number of daily new coronavirus cases, although this has come down from a peak in September, Moody’s said in a note.
If the listed firms’ profits are increasing and GDP is set to fall by 8-9%, it is an indication that a larger segment of the MSME sector is going to be badly hit. MSME is a key sector responsible for full-fledged economic recovery and employs a huge number of the population altogether. We have witnessed the growth during the period of unlocking and expecting a strong recovery in the next fiscal year. — Rajesh Gupta, Co-founder and Director, Busy Accounting Software
Indicators of the economic recovery are definitely present in every data set out there, however, the road to full recovery is very long as SMEs and MSMEs, which are the backbone of the economy, are the most impacted by the pandemic, continue to be in high distress. The government must continue support in form of spending, tax SOPs, or direct benefits to businesses. Business recovery is directly proportional to the economic recovery — Ankit Shyamsukha, CEO, ICA Edu Skills.
The possibility of re-imposition of restrictions in one or more states, on account of a fresh surge in Covid-19 infections may temper the momentum of the recovery.
India’s economy saw a significant improvement in various macroeconomic indicators in the month of October 2020; however, it is unlikely to sustain after the festive season. The spikes in the production seen in various sectors in the month of October are an exaggeration of the true recovery on the ground, as those have been driven by a large component of pent-up demand that may not sustain after the festive period is over. Read full story here
The RBI governor said that market participants responded with alacrity and together we have been able to ensure stable and resilient markets across all segments. Further, a comfortable external balance and current account surplus have brought comfort. He added that internationalisation of financial markets can lower transaction costs with efficiency gains.
RBI Governor Shaktikanta Das said that after seeing a sharp GDP contraction in the first quarter, the Indian economy has exhibited a stronger than expected momentum in activity. However, he added that even as the growth outlook has improved, downside risks remain with respect to the surge in Covid infections. Read full story here
While banks, NBFCs, construction companies, etc contributed to the growth in profits of the listed companies in Q2, nearly half the profits came from manufacturing companies. The 1,675 listed manufacturing companies in the sample made Rs 72,600 crore in net profits, which makes 47 per cent of the total PAT of the 4,076 companies in this study. This is the highest ever profit generated by the listed manufacturing companies and is 16.7 per cent higher than the previous record of around Rs 62,200 crore in Q1 FY19.
Listed companies in India have managed to generate bumper profits despite the lockdown to arrest the spread of the coronavirus pandemic. Nearly four thousand listed companies reported combined profits of Rs 1.5 lakh crore in the fiscal’s second quarter July-September, which is the highest profit made by all listed companies in any quarter. Read full story here
At a time when global economic activity is besieged by the outbreak of the second wave of COVID-19, incoming data for the month of October 2020 have brightened the near-term outlook for the Indian economy and stirred up consumer and business confidence. There are, however, formidable downside risks that confront the path of recovery, RBI said in its November bulletin.
The Reserve Bank of India has estimated a GDP contraction of 8.6 per cent in Q2, and Bank of America estimated the shrinkage of 7.8 per cent in the same quarter.
Apart from the trend in COVID-19 cases, we see risks stemming from faster tightening of domestic financial conditions, higher-than-expected stressed asset creation, and slower recapitalisation of PSU banks weighing on the growth trend. On the external front, risks could emerge from a slowdown in global growth, changes in commodity prices, and swings in capital flows. — Morgan Stanley
We expect the growth recovery to strengthen in 2021, with GDP growth improving to 9.8% on-year from an estimated contraction of 5.7% in 2020. We estimate the economy to have recovered to the pre-pandemic level of output in 4Q20. — Morgan Stanley
Pharmaceutical companies are expected to achieve normalcy in the ongoing quarter October-December as the gradual unlocking has led the activity levels to pick up in hospitals and clinics. Indian pharmaceutical market grew 1 per cent on-year in Q2 FY21, against a fall of 5.9 per cent in the first quarter. Read full story here.
Floods in many parts of the country created disruptions in the farm sector, and government expenditure was stagnant. Although the relaxation of the lockdown resulted in an improvement in economic activity to some extent, the capacity utilisation continued to be low. — M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings.
We had estimated the contraction in the second-quarter GDP at about 13.5 per cent. The leading indicators of the economy did not record significant recovery until September. The trade, hotels and transport sectors did not show much recovery. Recovery in the construction sector was patchy due to the non-availability of migrant labour; manufacturing suffered from both labour shortage and supply disruptions. — M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings.
The expectation is of a contraction of 8.8% in the September quarter. But, RBI has indicated towards stronger than expected pick-up of the economy and our experience on the ground has also been the same. I will not be surprised if the contraction comes to be lower. Anyways, we are expecting a strong recovery in the next financial year. — Mohit Ralhan, Managing Partner & CIO, TIW Private Equity.
ICRA projects the on-year contraction in Indian GDP to have narrowed appreciably to 9.5% in Q2 FY2021 from 23.9% in Q1 FY2021, as the economy recovered from the lows of the pandemic-induced lockdown. Similarly, the contraction in the gross value added (GVA) at basic prices is expected to have moderated considerably to 8.5% in Q2 FY2021 from 22.8% in Q1 FY2021.
We expect the contraction in manufacturing GVA to narrow considerably to around 10% in Q2 FY2021 from 39.3% in Q1 FY2021. Nevertheless, the extent of the recovery in the performance of the informal sectors in Q2 FY2021 remains unclear, and we caution that trends in the same may not get fully reflected in the GDP data, given the lack of adequate proxies to evaluate the less formal sectors. — ICRA
A substantial recovery in manufacturing and construction is likely to underpin the expected improvement in the performance of the industrial GVA in Q2 FY2021. Various sectors of manufacturing recorded an improvement in demand and volumes in Q2 FY2021, although the performance was admittedly uneven. — Aditi Nayar, Principal Economist, ICRA.
Future prognosis will depend on two things– the shape of the recovery from COVID infections and how fast the vaccine is rolled out. With domestic vaccine entering Phase III and one more phase to go, COVID-19 recovery will be contingent on how fast the vaccine is rolled out and consumer confidence is restored. The best estimate of full recovery in consumer confidence can be placed in Q3 FY22. — SBI Research
“We are also revising our Q2 GDP growth to -10.7%, from an earlier -12.5%, with positive bias, based on our nowcasting model with 41 high frequency indicators, associated with industry activity, service activity, and global economy. Our estimate of Q2 FY21 is aligned with the economic growth seen by various economies in Q3 2020,” said SBI Research
India’s economy will not improve in a linear fashion. However, the broader improvement in activity levels, as more sectors resume full operations, underpins our view that GDP will improve faster than anticipated by policymakers, especially the RBI — Barclays
India’s economy is seeing a faster return to normal, with the COVID-19 curve flattening. A possible vaccine roll-out from Q1 20 should broaden the recovery from farm and manufacturing to services. We raise our FY22 growth forecast to 8.5% from 7.0%, to reflect a faster recovery in services amid continued policy support — Barclays
