Gradual recovery underway? Economic growth may improve in Q4FY20; these 3 factors to be key drivers

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Published: February 27, 2020 12:28:31 PM

A 2013 RBI research paper shows that rising real interest rates have a negative impact on GDP and investment in the economy.The public spending may provide support to the economy even as private consumption continues to remain weak, it added.

The economic growth is expected to improve in Q4FY20 after six consecutive quarters of slowdown, analysts said. Support from the corporate tax rate cuts, healthy crop production and fading away of weather disruptions in mining and allied sectors are likely to be the significant drivers of the growth rebound, the Barclays report said. The public spending may provide support to the economy even as private consumption continues to remain weak, it added. In Q4FY20, the GDP growth rate may be recorded at 5 per cent, just above the RBI’s projection of 4.9 per cent, the report added. The coal, steel, and cement showed a sharp sequential improvement in Q4 2019, even as the recovery in the services sector remains lacklustre, owing to weak credit growth, the report also said. The CSO is scheduled to release Q4FY20 GDP growth rate numbers of February 27, 2020.

However, the SBI Ecowrap research report released on Wednesday said that the GDP growth rate will remain flat at 4.5 per cent similar to as in Q3FY20. In addition, the SBI report revised upwards FY20 GDP at 4.7 per cent from 4.6 per cent with a downward revision in FY19 GDP. “With the FY19 GDP growth being revised downwards steeply to 6.1% in FY19 it indicates that the growth slowdown was much more significantly entrenched and had started from April 17 onwards / FY18 after reaching a peak of 8.3% in FY17 and only worsened in FY19 (post the ILF&S crisis) and in FY20 it has reached its nadir with growth projected at 5% by CSO (with a downward bias),” the report added.

Also read: Economic revival in 2020? These five challenges about which India can do nothing may spoil the party

The Indian economy is seeing a slowdown for some time now on account of both global and domestic factors. According to the first GDP advance estimates released by the government, the economy is expected to grow at 5 per cent in FY20.

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