GDP may grow marginally in December quarter after two successive quarters of contraction

The GDP data releasing today may show the Indian economy returning on the growth path in the October-December period, after two successive quarters of contraction.

Most of the high-frequency data such as industrial production, PMI, GST collection, rail freight loading, auto sales and non-oil, non-gold imports have moved into positive territory in the quarter under review, giving hopes of the economy turning the corner.

The RBI has projected growth of 0.1% during the third quarter, while the State Bank of India in its projections has said the acceleration will be to the tune of 0.3% in the December quarter.

Various rating agencies such as ICRA, Ind-Ra have estimated the growth to be between 0.3% and 0.7%. The DBS bank however says the economy will expand 1.3% in the Dec quarter.

“We peg 3QFY21 GVA (gross value added) estimate at 1.6% year-on-year. Full-year real GDP growth in FY21 is expected to register -6.8%, before cyclical tailwinds and base effects lift full-year FY22 to 10.5%, assuming a well-contained caseload and on-track vaccination programme,” the DBS Bank said.

Farm output will continue to add to the growth in the December quarter, joined by firmer manufacturing output, benefitting from festive demand, resumption in activities and restocking of supplies.

“Amongst services, financial services and public administration are likely to fare better than contact-intensive facilities like travel, airlines, and tourism.”

The industrial remained positive for two of the three months under review, both, manufacturing and services PMI remained above 50, which separates growth from contraction.

Better industrial output and manufacturing translated into handsome goods and service collection since October period and it remained above Rs 1 lakh crore in all three months.

The agriculture sector, which remained in the positive territory throughout the pandemic, is expected to do better in the coming quarters too.

India’s GDP contracted by nearly 24% in the April-June quarter and recovered to log a decline of 7.5% in the July-September quarter forcing India to enter into a recession.