Sankar Chakraborti, Group CEO, Acuité Ratings & Research on India GDP data announced today:

"A significant contraction in Q1FY21 GDP year-on-year was in the works with the nationwide lockdown spanning a predominant part of the quarter, thereby creating a sharp economic disruption both on the supply and the demand side. With a major decline in domestic demand for most goods and services except for essential goods, it is not surprising that private consumption has dropped by 26.7% in April-June 2020. Expectedly, government expenditure has increased by 16.5%, pulling up its share in overall GDP to 18% but its ability to offset the massive decline in consumption is limited. The impact of the disruption is also seen in gross capital formation which slipped by 47.1% in Q1 and is also reflected in the weak credit offtake figures. The particularly large contraction in construction, retail and transport services along with that in manufacturing, has been clearly driven by the lockdown; except for retail and transport, most of these activities are likely to see a meaningful revival in Q2. The impact of the lockdown, however, has been the least in financial sector and government services where the decline has only been to the extent of 5%-10%, partly also reflecting the effectiveness of work from home model. In our opinion, GDP would continue to contract in Q2 although the extent of such contraction would be substantially lower; overall in FY21, a 10% contraction is a definite possibility given the slow pace of the revival."

Source : Equity Bulls

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