Q3 growth turns positive at 0.4%; full year contraction expected at 8%

Breaking away from the contraction in the first two quarters of the current fiscal, the Indian economy returned to the growth path with GDP rising 0.4% for the October-December quarter, according to government data announced on Friday.

For the full year, the GDP contraction is expected to be 8% from the 7.7% in the first advance estimates.

In the current fiscal, the country’s GDP contracted by a huge 23.9% in the first (April-June) quarter, following the countrywide lockdown. In the second quarter (July-September), the shrinkage reduced to 7.5%.

However, the contraction figures were revised on Friday to 24.4%  and 7.3% in the first and second quarters, respectively.

In the corresponding (October-December) quarter of 2019-20, the country’s GDP had grown by 4.7%.

Manufacturing, construction, electricity, gas and water supply would contract at 9.3%, while financing, insurance, real estate etc would have a de-growth of 0.8%. Community, social and personal services would contract at 3.7% in the current year.

However, according to the data released on Friday, a few sectors of the economy have started looking up.

The construction sector that suffered a contraction of 8.6% in Q2, recorded a growth of 6.2% in Q3. This sector suffered 50.3% contraction in April-June.

Manufacturing showed 1.6% rise in October-December quarter, after recording a 0.6 % growth in the September quarter that was a vast improvement from the contraction of 39.3 per cent in April-June this year.

This piece of data about manufacturing was of particular interest to many since it meant that factories recorded output that was a bit higher than the corresponding period (July-September) in 2019-20 when the economy was in a better shape than the Covid-hit 2020.

Electricity, gas, water supply and other utility services grew at 7.3% in October-December quarter after a 4.4% rise in July-September quarter breaking away from a 7% fall in April-June.

Agriculture, forestry and fishing industry grew at the same pace of 3.4% in both the first two quarters. In October-December, this sector recorded a growth of 3.9%.

Trade, hotels, transport and communication etc that has a huge services component recorded a 7.7% fall. This sector suffered 47% contraction in April-June and another 15.6 % decline in July-September.

Public administration also suffered a dip of 1.5%. Private final consumption figures growth stood at -2.4%.

The Economic Survey 2021 predicted that the Indian economy is set to contract by 7.7% for the full financial year of 2020-21. It is expected to move on a recovery course in 2021-22 when a 10-12% growth is expected.

According to the survey in the current year, all other sectors of the economy, apart from agriculture, are set to suffer a dip.

According to the advanced estimates, in 2020-21 while agriculture is expected to grow at 0.9%, the service sector led by hotels, transport & communication and trade is set to suffer the worst contraction at 21.4%.