India GDP could further decline, economy to grow only 0.3% in 2 years

by amolwarankar
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New Delhi: The Indian economy is forecast to show an average growth of only 0.3 per cent in two years as India enters its first technical recession, GDP could post further decline in 3QFY21.

As per a report by Motilal Oswal Financial Services, “Real GDP declined 7.5 per cent YoY in 2QFY21 (or 3QCY20), worse than our expectation, but better than the market consensus”.

Fiscal spending, consumption plus investments, posted its first major contraction since FY15 and is the worst on record. On the contrary, decline in private spending narrowed to -9.2 per cent in 2QFY21 from -35.4 per cent YoY in 1Q.

The government and private sectors are naturally highly interlinked with each other, the report said. A comparison of India with other major nations suggests India is no longer the worst affected economy – as the Philippines’ real GDP saw double-digit decline in 3QCY20 and decline was also higher in the UK and Mexico.

Due to a weaker-than-expected 2QFY21, we revise down our 3QFY21 and 4QFY21 growth forecasts. “We now pencil in a decline of 1–2 per cent YoY in 3QFY21 (v/s a negligible decline earlier) and growth of 2–3 per cent YoY in 4QFY21 (v/s +4.2 per cent predicted earlier).

Accordingly, India’s real GDP is forecast to decline 7.5 per cent YoY in FY21 (v/s the previous forecast of -6.5 per cent ), but grow 8.5 per cent in FY22 (against 7.8 per cent growth expected earlier). This implies average growth of only 0.3 per cent in the two years,” the report said.

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