Listed companies beat contraction in June, and so do GDP growth estimates

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August 17, 2020 3:03 PM

While it was expected that India’s GDP growth will nosedive due to the coronavirus pandemic and subsequent lockdown, the same has been revised now and has been projected at a lower shrinkage.

Listed companies too have shown a recovery in their net losses in the June 2020 quarter as compared to the quarter ended March 2020, according to a separate data by CMIE.

While it was expected that India’s GDP growth will nosedive due to the coronavirus pandemic and subsequent lockdown, the same has been revised now and has been projected at a lower shrinkage. “We revisit our GDP growth estimation for Q1 FY21 (at lower than -20%) and now peg it at much lower contraction: -16.5%, though with the relevant caveats in the current uncertain scenario,” an SBI Ecowrap report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India, said on Monday. In fact, listed companies too have shown a recovery in their net losses in the June 2020 quarter as compared to the quarter ended March 2020, according to a separate data by CMIE.

“Degrowth in Corporate GVA is significantly better than revenue degrowth in Q1FY21 as far as the results of the listed companies are concerned. In principle, revenue decline of listed companies has been far outstripped by cost rationalization thereby not impacting margins,” the report said. While recovery has been pushed by rural growth, the same is unlikely to sustain GDP recovery in the coming quarters. Rural wage growth in real terms might still be negative and the urban per capita monthly expenditure is at least 1.8 times of rural areas. “This indicates that rural recovery will not have much impact on GDP growth. Thus, it is of utmost importance to unveil further steps to support growth,” the report said. 

Meanwhile, in July and August, the coronavirus pandemic has only worsened and has also significantly penetrated the rural areas. States such as Andhra Pradesh and Maharashtra, which have a considerable contribution in GSDP are among the worst affected in terms of rural penetration of the virus. Further, unplanned exits from lockdown and entry in fresh lockdowns is also likely to have detrimental effects on livelihoods. 

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