DH Poll: GDP may contract by 21% in Q1, 1.3% in FY21

India's gross domestic product (GDP) is expected to contract by an unprecedented 21% in the current quarter (April-June) despite the farm sector having shown reasonable growth.

Economists told DH that the contraction is likely to be the first for the economy in the past four decades.

Out of 12 economists polled by DH, economists from UBS, CARE Ratings and Ind-Ra didn't divulge any quarterly estimates, while the remaining nine estimated a huge contraction for the quarter ending June 2020, the average of which comes to 21%. The estimates on contraction range between 9.1% by Kotak Securities to a whopping 45% contraction predicted by Goldman Sachs.

Half of the ongoing quarter has witnessed a stoppage — both partial and full — of economic activities across the country due to the coronavirus-induced lockdowns.

However, agriculture, which contributes 17% to India's GDP, has helped in arresting a much deeper contraction in economic growth.

"Since India has higher agricultural contribution in GDP than western economies, it is likely to be less affected by the economic contraction, given that agriculture has been exempt from the lockdown," said Sreejith Balasubramanian, Economist, Fund Management, IDFC AMC.

Most economists, except for CARE Ratings and Ind-Ra, now estimate India's annual GDP to contract. Of the 12 economists polled, 10 expect the GDP to contract. The annual estimates of India's GDP range between 1.9% growth predicted by Ind-Ra to a maximum of 5% contraction estimated by Goldman Sachs and IDFC AMC.

"The risks are broadly balanced to our forecasts," said Nikhil Gupta of Motilal Oswal. "While the extension of lockdown/restrictions leads to downside risks, the fact about unorganised/informal sector, which is by far the most significantly hurt by these events, is rarely captured in the quarterly GDP estimates, providing upside bias to our forecasts."