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India's Economy Grows 0.4% y/y in Oct-Dec Quarter

BENGALURU, Feb 26 (Reuters) - India’s economy expanded by 0.4% year-on-year in the October-December quarter, returning to growth after shrinking for two straight quarters, government data showed on Friday.

The readout for the December quarter was a tad lower than the 0.5% growth forecast of analysts in a Reuters poll.



“The Indian economy has turned a corner during 4Q20, growing by 0.4% yoy, slightly lower than the consensus expectation, though we expected one final quarter of contraction.

To us, the data appears to be at variance with the high frequency data. Disaggregated data shows that domestic consumption continued to contract while real government spending dipped too, albeit marginally.

A sharp pick up in investment enabled the economy to record a marginally positive growth as did a lower trade deficit on account of less-than-robust economic activity. Going forward, we believe that investment and not consumption will be India’s growth driver.”


“Q3 GDP was slightly lower than expectations, albeit showed that the economy did move into the green. Going ahead, we are likely to see a continuation of a K-shaped recovery with some sectors growing faster than others.

We expect growth to print at 1.5% in Q4 and -7.5% for the whole year FY21. We expect GDP for FY22 at 11.5%. We expect the economy to reach pre-pandemic output levels by the end of the calendar year 2021.

That said, there are some risks that need to be watched out including rising commodity prices, slow global recovery, and the pace of recovery in the informal sector and contact intensive services with the resurgence of domestic cases.”


“Headline Dec-quarter GDP was a mixed bag with GVA (gross value added) growth 1% YoY coming close to our estimate, although some of the internals in the data were underwhelming. Having said that, the outcome is not entirely negative considering downward revisions for previous quarters.

These numbers will surely get revised further given this is an exceptional year. The GDP data confirms sharp activity uptick in Dec quarter and positive YoY growth one quarter ahead of earlier expectations.

High frequency indicators in January and February show that activity levels have stabilized post Dec quarter therefore continued growth momentum. However, we haven’t overcome the health crisis as yet and hence policy will continue to lean towards supporting growth.”

(Reporting by Anuron Kumar Mitra and Sachin Ravikumar; Editing by Aditya Soni)

Source: Reuters


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