Real GDP to contract by 10.9% in FY21, negative growth for all 4 quarters: SBI Ecowrap

After India recorded a devastating fall in the Q1 GDP by a record 23.9%, reports have suggested a similar trend is likely to be witnessed in the country's real GDP for FY21. According to State Bank of India's research report - Ecowrap, the real GDP for FY21 is expected to shrink by 10.9 per cent. The report has estimated Q2 real GDP to decline in the range of -12% to -15%, Q3 GDP by -5% and -10%, and Q4, expected to be between the -2% to -5% range.

“Our preliminary estimate indicates that all the four quarters of FY21 will exhibit negative real GDP growth, and decline of full year growth will likely be in double digits (around 10.9 per cent),” the research report stated.

Meanwhile, analysing the drastic plunge in the country's GDP growth, the report stated that the nationwide lockdown imposed on March 25, and the subsequent collapse of the private final consumption expenditure (PFCE) due to the containment measures, which was limited to only essential items, was a major cause of this plunge. "With investment demand not seeing recovery due to unutilised capacity, the share of private consumption expenditure will remain on the higher side in overall GDP estimate," the report noted. 

The report, however, also spoke about two major positives emerging expected from the future quarters. According to the report, the RBI sector-wise credit-data for the month of July indicates that except industry, credit has increased in all other major sectors in July including the MSE (micro and small enterprises), agriculture, allied and personal loans. The other big positive was that some of the sectors where new projects announcements were seen included roadways, basic chemicals, electricity, community services such as hospitals, water sewage pipelines etc. A revival of construction, trade and hotels, aviation would further help the economy slip back on track, the report suggested.

Read: India's GDP Crashes To -23.9% In Q1- FY21 Due To COVID-19; Worst Contraction Till Date

Read: HD Kumaraswamy Slams Centre Over Failure In Managing Economy; Cites 'lack Of Vision'

India's GDP crashes to -23.9% for Q1

India's GDP for the first quarter of FY 21 stood at -23.9% as per data released by the National Statistical Office (NSO) on Monday, making it the worst contraction on record. In May, amid the nation-wide COVID-19 lockdown, India's GDP growth for the January-March quarter (Q4) 2019-20 stood at 3.1%. Overall FY 19-20 GDP stood at 4.2%, hitting an 11-year low. India, currently has extended its lockdown in containment zones till September 30, freeing up most restrictions.

Read: Economy Destroyed By Demonetisation, 'flawed' GST', 'failed' Lockdown: Rahul On FM's 'Act Of God' Remark

Read: Increased Testing, Opening Economy, Complacency Among People Behind COVID-19 Case Surge: Experts

(With PTI Inputs)