India GDP Highlights: Data shows demand revival in 2nd half of FY21, says CEA Subramanian; GDP grows 1.6% in Q4

“The slight pickup in the GDP amidst COVID and lockdown is likely to boost sentiments. The forecast of the future GDP states it may elevate better than the previous quarters. The growth rate swinging back in the positive territory is in line with most estimates, supported by high government spending, reform measures, and progressive unlocking. The improvement in the last two quarters does show some bright picture with the government's focus on improving infrastructure, the construction segment has shown phenomenal improvement. Going forward the steps taken to accelerate the vaccination drive will have major impact on the easing of lockdown and in turn the economy. Real estate will remain an investment of choice given that some uncertainty still persists," said Ram Raheja, Director, S Raheja Realty.

"Within GDP, there was broad-based better than expected growth. Real consumption (led by government) grew 6.4% YoY, and real investments grew 13.8% last quarter. What more, nominal GDP grew 8.7% YoY in 4QFY21, same as that in 4QFY20," said Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services.

India’s economic report card came in with better-than-expected numbers as the GDP recorded a 1.6% growth in the January-March period. The growth figures were better than the 1% median forecast by 29 economists polled by Reuters. For the full financial year 2020-21, the economic contraction came in at -7.3%, better than the government’s own -8% estimates. The agriculture sector continued to grow steadily in the quarter, while construction, electricity and other utilities posted strong growth. Although Q4 saw strong GDP growth, some do expect a reversal of the trend in the current quarter owing to the severe second wave seen in April and early May.

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"In the Mar-2021 quarter, the GDP grew by 1.6% which was a significant improvement from the 0.5% growth achieved in the Dec-2020 quarter. The second wave now appears to be subsiding and with the vaccination drive in full swing, India is likely to regain the growth momentum. The eight core industries have also bounced back in April on expected lines with Cement and Steel being the leaders. The data suggests a higher likelihood of broad-based demand revival from here on and achieving double-digit growth in FY-22 looks extremely possible. The government has also been steady on the reforms front including sectors such as agriculture, mining, manufacturing and power, which augurs well for the economy in the long term," said Mohit Ralhan, Managing Partner and Chief Investment Officer, TIW Private Equity

"GDP print for 4QFY21 at 1.6% looks encouraging given adverse impact of second wave of pandemic and implied negative growth forecasted by NSO. Notably, a sharp 28% YoY and QoQ jump in government expenditures was a key growth driver during the quarter, while private consumption growth remained soft with 2.6% YoY growth. Manufacturing and Constructions contributed significantly in 4QFY21 by growing 7% and 14% YoY, respectively and increasing their GDP contribution by 50-90 bps. Overall, this number indicates sound prospects ahead with weakening of second wave," Binod Modi Head Strategy at Reliance Securities.

"The country has witnessed good economic growth for two quarters consecutively with the unlocking of the economy that led the operations to scale up leading to better revenue generation. The second wave of pandemic may temporarily slower the economic growth in Q1FY'22, however, the nationwide vaccination drive has helped in improving the business sentiment across the country. From a Real-estate standpoint, construction has also risen by 14.5% owing to the foresight of the first wave and the tailored reforms to keep businesses and construction operational," said Rohit Poddar, Managing Director, Poddar Housing and Development.

“The economic growth rate for January-March quarter as well as full-year FY21 is a pleasant surprise. We have seen positive economic growth for two consecutive quarters. Statistically, the growth rate for FY21 is negative but it is way better than most estimates. The government initiatives provided support to agriculture and manufacturing segment, but the hotel and tourism sector continued to witness contraction due to strict lockdown. The better than expected GDP data will have a positive bearing on the RBI credit policy scheduled later this week. Moving forward, we expect growth rate to pick up on back of latest relief measures announced by the government, phased unlocking by states, normal monsoon, high vaccination and lower number of new cases. However, growth rate for April-June quarter will be weak due to the lockdown on trade & business activities for most part of the quarter," said Nish Bhatt, Founder & CEO, Millwood Kane International - an Investment consulting firm.

"The estimate of 3.7% growth in GVA and 1.6% growth in GDP in the fourth quarter of FY21 is largely due to a low base, and also reflects a slight improvement in the economic activities. Construction and Manufacturing activities seemed to have picked up faster in the last quarter of FY21 while the services sector continues to suffer the most with Trade, hotels segment estimated to contract by 15.5%. The muted growth in public administration is also delaying the growth revival. However, the better than expected GDP estimates provides some comfort to the RBI MPC, which is likely to maintain the repo rate at 4% in its upcoming meeting," said M. Govinda Rao Chief Economic Adviser, Brickwork ratings.

“The GDP growth print for overall FY21 and Q4FY21 at -7.3% and 1.6% respectively is significantly consistent with our forecasts and confirms the growth momentum that had started to build in since Q3FY21. What catches our attention, however, is the quarterly GVA print for Q4FY21. The manufacturing sector has delivered a 6.9%YoY growth in Q4 which despite the impact of the base factor, highlights the pickup in industrial activity. Further, the construction sector has recorded a growth of 14.5%YoY which in our opinion, indicates the effect of government capital expenditure. While the second wave of Covid is likely to impact these segments in Q1FY22, it is clear that removal of lockdowns and movement restrictions by June should help the economy pickup the lost growth momentum by Q2/Q3FY22 unless we see a threat of third wave etc. We, therefore, continue to hold our forecast of 10% GDP growth for FY22," Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research.

"India’s real GVA for Q4 and full year of FY21 grew better than the advance estimate, with annual manufacturing and construction y/y growth rates being 120bps and 170bps better than the Government’s February estimate. With the onset of the second wave, the key aspects really are how would household income and consumption shape up, the impact on and thus the contribution from the rural economy this time and investment and lending behaviour," said Sreejith Balasubramanian, Economist – Fund Management, IDFC AMC.

In the January-March quarter, India recorded a GDP growth of 1.6%. The economy accelerated after having grown by 0.4% in the previous quarter. 

CEA Krishnamurthy Subramanian said that demand in rural India has been resilient. Earlier last year, rural India continued to aid the economy while urban India fought the initial wave of covid-19.

CEA said that the agriculture sector has been a silver lining, clocking consecutive growth. He added that the second wave will have some impact on the economy. 

"After the quarter one numbers were released, we had said things will get better from here and had predicted growth. Heartening to know those projections have held. Annual numbers signify a revival in demand," said Chief Economic Advisor Krishnamurthy Subramanian. He added that the second wave is likely to have hit some of the recoveries. 

“The better-than-expected Growth print partly owes it to healthy corporate results in March quarter of FY21. We admit the situation is still in flux, and it is too nascent to gauge the true impact of the second wave on macro variables. We believe that the impact is unlikely to be of the same magnitude as last year. Clearly, factors such as better adapted firms and policy response, stable financial conditions and robust global growth spillovers create growth buffers back home. However, credible vaccine drive remains key. The faster the vaccine traction, the faster would be the delinking between mobility and virus proliferation," said Madhavi Arora, Lead Economist, Emkay Global Financial Services.

"GDP registered a growth rate of 1.6 per cent in Q4FY21, supported mainly by government expenditure. Government final consumption expenditure (GFCE) registered a growth rate of 28 per cent whereas private final consumption expenditure registered a growth rate of 2.6 per cent. The impact of the second wave of the pandemic could be seen in the GDP figures for Q1FY22 as most of the states enforced lockdowns and other restrictions from April onwards," said Deepthi Mathew, Economist at Geojit Financial Services.

Sectoral data shows the Indian economy was moving on the recovery path, with sectors such as construction, manufacturing, and financial services reporting growth. However, with the second wave wreaking havoc across the country in April and May, the recovery might have de-railed. 

Gross Value Added (GVA) in the fourth quarter grew 3.7% in the January-March quarter, against 1% in the previous quarter and 3.7% in the same period last year. 

Electricity, gas, water supply, and other utilities saw a growth of 9.1%, against 7.3% in the previous quarter.

The construction sector saw a growth of 14.5% in the fourth quarter at basic prices, helping the economic growth accelerate.

In the previous financial year, India's Gross Value Added (GVA) came in at -6.2%. 

In Q4, Agriculture grew 3.6% growth against 4.3% in the year-ago period.

Electricity and other utility services grew 1.9%, against 2.1% in the previous quarter.

Real GDP or GDP at Constant (2011-12) Prices in the year 2020-21 is now estimated to attain a level of Rs 135.13 lakh crore, as against the First Revised Estimate of GDP for the year 2019-20 of Rs 145.69 lakh crore, released on January 29, 2021. The growth in GDP during 2020-21 is estimated at (-) 7.3 percent as compared to 4.0 percent in 2019-20.

GDP at Constant (2011-12) Prices in Q4 of 2020-21 is estimated at ?38.96 lakh crore, as against ?38.33 lakh crore in Q4 of 2019-20, showing a growth of 1.6 percent.

In the January-March quarter, India's GDP grew by 1.6%. For the full year 2020-21, the economy contracted 7.3%, hit by the covid-19 induced lockdowns.

In April, the cement sector grew 548.8% on-year basis, helped by a lower base. In the previous month, the same stood at 32.7%.

On-mont data shows that in April Eight Core Sectors saw a contraction of 15% from the previous month.  

In the previous financial year, Eight Core sectors growth stood at a negative 6.5%.

April Eight Core Industries growth came in at 56.1% on-year basis. Eight Core Sectors had grown 11.4% in the month of March.

It is likely that the previously published CSO GDP growth for FY21 at –8% might see an upward revision once the numbers are released on 31 May’21. Based on quarterly GDP numbers in FY21 and full year FY21 GDP estimates, Q4GDP was projected to reveal a contraction of 1.1% . Based on SBI Nowcasting model the forecasted GDP growth for Q4 would be around 1.3% (with downward bias). We now expect GDP decline for the full year to be around -7.3%

The Employees Provident Fund Organisation (EPFO) has allowed its members to take a second non-refundable COVID-19 advance. This provision for special withdrawal to meet the financial need of members during the pandemic was introduced in March 2020 under Pradhan Mantri Garib Kalyan Yojana (PMGKY). And an amendment to this effect was made by the Ministry of Labour & Employment in Employees’ Provident Funds Scheme, 1952 by inserting therein sub-para (3) under paragraph 68L, through a notification in the Official Gazette, the Ministry of Labour and Employment said in a statement today.

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"We expect GDP growth to recover to 2.5% on-year in QE March, amid broad-based improvement across components. High-frequency indicators such as PMI, rail freight, power demand, GST collections and E-Way Bills all improved amid a better COVID-19 situation in the quarter,” Morgan Stanley said in a note last week. Morgan Stanley estimates a broad-based improvement in the services sector, while industry growth is expected to reflect a slight sequential slowdown.

The median forecast of 29 economists surveyed by Reuters pegs the economic growth in the January-march quarter to be 1%, up from 0.4% in the previous quarter. 

BSE Sensex and Nifty 50 ended higher on Monday, led by a healthy buying in index heavyweights such as RIL, ICICI Bank, Bharti Airtel and HDFC Bank. The 30-share Sensex surged to an over 3-month high and ended at 51,937. During intraday, the index zoomed 590 points and hit a high of 52,013. Nifty 50 clocked a record peak of 15,606 in the intra-day session. It, however, pared some gains and settled at 15,582.80. Market breadth was positive as 1,744 stocks advanced while 1,492 declined. A total of 191 shares remained unchanged. The broader market was also positive. S&P BSE Midcap index gained 0.45 per cent or 96 points to end at 21,758, while S&P BSE Smallcap index ended at 23,474, up 0.5 per cent or 117 points.

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“With a widespread recovery in volumes benefitting from the low base of the onset of the nationwide lockdown in March 2020, we project the growth of the GVA at basic prices to have improved to 3.0% in Q4 FY2021. Moreover, we peg the GDP growth for the just-concluded quarter at 2.0%, suggesting that the double-dip recession implied for Q4 FY2021 by the NSO’s 2 nd Advance Estimates for FY2021, was averted,' said Aditi Nayar, Chief Economist, ICRA.

Financial services sector could grow 6%. "Financial sector remained relatively resilient throughout the pandemic. We expect steady growth in the sector."

Public administration may grow at 7%. "Removal of spending caps for various departments and resultant expenditure by various departments likely helped to increase public expenditure."

Net taxes minus subsidies to contract 9%. "Indirect tax collections registered record highs in Q1 21. Fiscal transfers likely to continue to result in distortions in tax data."

~ Barclay's

Electricity, Gas and Water to grow 7.5%. "Demand for public utilities improved, in line with the continued normalization in activity."

Construction expected to grow 8%. "Strong increase in construction activity likely drove demand for steel and cement, but high input costs likely to have some effect."

Trade and commerce to expand 1.5%. "Low base and strong sequential gains in consumer mobility and demand helped to boost activity."

~ Barclay's

Agriculture expected to grow at 3% rate. "Farm output is on course for a strong end to the rabi (winter) crop season."

Mining and quarrying to contract 4%. "Industrial output data showed that mining output remains a drag, with activity still contracting amid high inventories and rising prices."

Manufacturing to grow 8%. "Strong improvement in manufacturing output likely to boost growth to a high of 8% y/y. Low base and sharp sequential gains drove the gains."

~ Barclay's