India: GDP keeps looking to the pandemic – UOB

UOB Group’s Economist Barnabas Gan gives his views on the recently published GDP figures in India.

Key Quotes

“India’s GDP expanded 0.4% y/y in the third quarter of its fiscal year (3QFY2020/21: October – December 2020). This is the first positive print after two consecutive quarters of contraction in 1Q and 2QFY2020/21. Still, GDP disappointed market estimates which pencilled a marginally higher growth rate of 0.6% y/y.”

“Economic prognosis appears to be significantly better when compared to how it performed at the start of its fiscal year. Despite GDP growth disappointing market estimates, it still clocked a positive growth print in 3QFY2020/21. This is also the second quarter where GDP improved from the trough seen in 1QFY2020/21 when it plummeted 24.4% y/y then.”

“India’s growth prospects will depend largely on how COVID-19 evolves. Overall, India’s GDP declined 10.4% y/y in the first three quarters of its fiscal year, and is slated to contract 5.0% y/y in 4QFY2020/21. This will bring India’s full fiscal year GDP to fall 9.0% y/y in FY2020/21, up from RBI’s GDP expectation for a deeper 9.5% contraction in FY2020/21. Notwithstanding the contraction in FY2020/21, macroeconomic indicators have been recovering, while the outlook is also expected to improve further with the rollout of the vaccine programme across the country. The expansionary Union Budget is also expected to lift economic momentum into the new fiscal year. As such, we expect India’s GDP to grow by 10.5% y/y in FY2021/22.”