India’s GDP Growth Likely be at 3.6% in January-March Quarter: Care Ratings

The country’s GDP growth is likely to be at 3.6 per cent in January-March 2020 as economic activity came to a complete halt due to the countrywide lockdown imposed to contain the coronavirus outbreak, says a report. The government will release the fourth quarter GDP data on Friday.

“We expect GDP growth in Q4 to be 3.6 per cent with the headline number coming down to 4.7 per cent for the entire year,” rating agency Care Ratings said in a report.

The expected growth of 3.6 per cent will be an all-time low in the GDP new series, it said. In the first three quarters of FY2020, the growth was 5.1 per cent.

Recently, SBI research report — Ecowrap — has predicted fourth quarter GDP growth at 1.2 per cent, with full year growth expected to be at 4.2 per cent.

The report said the fourth quarter GDP growth numbers will be noteworthy as it includes one week of lockdown which has the potential to skew the growth numbers.

Several companies tend to have some kind of bunching of activity towards the end of the financial year to meet their targets, which lends an upward thrust to growth numbers.

“In the Indian case, while the shutdown was in the last week of March several restrictions had come in earlier especially for services which would have pushed back growth numbers further,” the rating agency said.

It said the growth rate of the last quarter would also be relevant when estimating the first quarter of FY2021 growth rate when economic activity had come to a virtual standstill in April and showed extremely limited momentum in May with the services sector being affected the most.

“Considering that growth is expected to be a substantial negative in Q1 of FY21, the downward trajectory will be exacerbated this year and can show positive signs only post Q3 FY21,” Care said in the report.

Many analysts expect the country’s economy to shrink by 5 per cent to 6.8 per cent this fiscal. The response of individuals would be critical on the resumption of this consumption cycle.

The industry would invest more depending on demand conditions and it is here that the infra push of the government can make a difference.

“There could be a strong case for the government announcing an aggressive infra spending plan of say 1-2 per cent of GDP that can tackle the issue of both investment and employment to begin with,” the rating agency added.