India’s GDP grew by 0.4 per cent in the October to December quarter (Q3 FY21), marking a return to positive zone after two-quarters of recession but showing a lingering weakness in the economy, government data showed on Friday.
A sharp improvement in the Covid-19 situation and rising public spending are the two factors behind uptick. “The GDP at constant (2011-12) prices in Q3 of 2020-21 is estimated at Rs 36.22 lakh crore as against Rs 36.08 lakh crore in Q3 of 2019-20, showing a growth of 0.4 per cent,” said the National Statistical Office (NSO).
A continuing fall in domestic consumption is seen as a strong reason behind the sluggish pace.
According to second advance estimates of economic growth, the real GDP in current financial year (2020-21) is estimated at negative 8 per cent as compared to growth rate of 4 per cent in 2019-20.
Investment recorded its first growth since December 2019, growing at 2.6% compared to a revised 6.8% fall in the previous quarter, while weakness in consumer demand eased.
Consumer spending – the main driver of the economy – dropped 2.4 % year-on-year in Oct-December compared to an 11.3% fall in the previous quarter, data showed.
The economy has returned to the “pre-pandemic times of positive growth rates”, a finance ministry statement said after the release of the GDP data, which it said reflected a continued V-shaped recovery.
“Significant recovery in manufacturing and construction augurs well for the support these sectors are expected to provide to growth in 2021/22,” said the statement, which also cautioned that India is not yet beyond “the danger of the pandemic”.
Economists have raised their forecasts for the current fiscal year and 2021-22, expecting a pick-up in government spending, consumer demand and a resumption of most economic activities curtailed by the Covid-19 pandemic.
Agriculture sector is estimated to see a growth of 3 per cent in FY21 as compared to 4.3 per cent in 2019-20. The manufacturing sector is likely to contract by 8.4 per cent during FY21. More worryingly, services sectors like trade, hotel, transport are projected to contract by 18 per cent. However, electricity is likely to grow at 1.8 per cent.
Some analysts warn, however, that a recent rise in crude oil prices and a surge of Covid-19 cases in parts of the country may pose risks to the nascent recovery.
“There are some risks that need to be watched, including rising commodity prices,” Sakshi Gupta, senior economist at HDFC Bank, told Reuters, adding that the pace of recovery in the informal sector and contact-intensive services could be impacted by the resurgence of domestic virus cases.
The economy contracted by 23.9 per cent in the April to June quarter (Q1 FY21) and by 7.5 per cent in the July to September quarter (Q2 FY21) as normal activities were disrupted due to nationwide coronavirus lockdowns.