India: Growth jumps to 0.4% in third quarter of the fiscal year

In Q4 2020, the third quarter of the 2020/21 fiscal year to 31 March 2021, India officially came out of recession. Real GDP was 0.4% higher than in Q4 2019. The recovery has been driven by an increase in government investment and a rebuilding of business inventories. In contrast, consumer spending –" the biggest component of GDP –" fell, whilst inflationary pressures have eased since November. Activity in the services sector was still down by 1%, while the agricultural and construction sectors recorded an acceleration, as did manufacturing, albeit to a lesser extent.

Economic indicators for January remain on the right track. Output in core industries recorded a positive growth for the second month in a row; goods freight accelerated, car sales increased strongly and unemployment dropped below its rate of a year ago (6.9% in February). However, the fourth consecutive monthly contraction in loans to companies offers little prospect of a recovery in private sector investment. Although a mechanical rebound in growth is expected in 2021/2022, stimulating private investment will be essential to boost medium-term growth and the level of employment without undermining the public finances.

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