May 30, 2023


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Q4FY20 GDP growth expectation: How bad will Covid-19 impact the economy?

The gross domestic solution (GDP) figures for the January – March 2020 quarter (Q4FY20 / Q1CY20) to be released on Friday could perhaps give a glimpse of the severity of the impact of the country-large lockdown imposed by the governing administration in the wake of Covid-19 pandemic. The numbers, which are likely to appear in put up-sector hrs on Friday, will start off to reveal the ache overall economy experienced to undergo as Covid-19 introduced all action to a standstill from the last week of March 2020.

When estimates vary throughout brokerages and economists, the prevalent thread that runs via these estimates is the truth that the overall economy is headed to a recessionary period with some even expecting growth to deal above 5 for every cent in financial yr 2020-21 (FY21).

Below is what economists at primary exploration residences count on in phrases of Q4FY20 GDP.


Higher-frequency growth indicators are exhibiting wide-primarily based declines throughout indicators on both of those the need and the offer sides. Nonetheless, the contraction in discretionary use and expert services has exceeded the slump in financial investment and industrial action.

We count on actual GDP growth to deal 5 for every cent y-o-y in 2020 and keep on being negative for 3 consecutive quarters. Our quarterly profile has growth faltering to 1.5 for every cent y-o-y in Q1-2020 (January-March / Q4FY20), right before contracting to fourteen.5 for every cent in April-June, and then weakly recovering to -6 for every cent in the July-September quarter and -1.5 for every cent in the Oct-December 2020 period of time.


The two week lockdown in March is likely to have erased the gains of January and February. The March IIP contracted sixteen.7 for every cent y-o-y, electrical energy use came in twenty five for every cent down below normal, and the unemployment level rose to previously mentioned 24 for every cent. Our India Development Tracker (IGT) suggests that action momentum in March contracted 50 for every cent annualised in GDP equal phrases. For the quarter as a entire (January-March 2020), this level to all over 10 for every cent annualised sequential contraction, and a – .5 for every cent y-o-y GDP growth.

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Q4-FY20 growth level would also be applicable when estimating the Q1-FY21 growth level when financial action experienced appear to a virtual standstill in April and showed extremely minimal momentum in May well with the expert services sector staying influenced the most. We count on GDP growth in Q4 to be three.6 for every cent with the headline amount coming down to 4.7 for every cent for the whole yr. Development was 5.1 for every cent for the first 9 months and would appear down to 4.7 for every cent by our estimates.


The DBS Momentum indicator factors to a fall in Q1-20 (Q4FY20), underscoring our forecast for growth at 1.three for every cent y/y vs December 2019 quarter’s 4.7 for every cent. The Reserve Financial institution of India (RBI) delivered an intermeeting slice last week, with the Governor noting that it was anticipated that entire-yr growth may well be in negative. DBS 2020 latest forecast at -three for every cent y/y is tilted to our possibility-situation of -5.5 for every cent as lockdown stands extended 4 times, ending on May well 31, even as partial reopening is underway. This would mark the first economic downturn because 1980.


Weaker-than-anticipated domestic financial action and the ongoing global economic downturn direct us to lessen our estimates for FY21 actual GDP growth, from -.4 for every cent YoY to -5.eight for every cent YoY, indicating India could be shifting to its worst-ever economic downturn. We now count on GDP to deal 40 for every cent QoQ annualised in the June 2020 quarter on unprecedented weakness in financial facts.