Statsguru: Down, yes, but how much? India's Q1 GDP data to reveal on Monday

The data indicate that apart from government spending and the farm sector, no other area could possibly show positive growth
The National Statistical Office will today release the official estimate of gross domestic product (GDP) for the quarter ended June 2020 (Q1 FY21). As more than half of the period under consideration was characterised either by national or local lockdowns, the question is how much will the quarterly GDP contract.

As many as 13 out of 18 indicators analysed by Business Standard showed a contraction in the April-June period, ranging from services exports at a 10 per cent clip, to domestic air travel with more than 90 per cent fall (chart 1). The data indicate that apart from government spending and the farm sector, no other area could possibly show positive growth. Share of both the agriculture in the gross value added (GVA), and that of government expenditure in GDP, is less than 15 per cent.

The performance of the economy had been poor even before the Covid-19 pandemic struck. Looking at the supply side, growth in value added in manufacturing gradually declined over FY20, and industrial activity contracted as a whole during the year. Services — the biggest sector in India and a major job creator — also faltered and its growth plummeted to 1.8 per cent in the March quarter (chart 2).

GVA in the farm sector, defence and public administration grew strongly in the last quarter of FY20 (chart 3), and is expected to lift the Q1 GVA number up, as it gets pulled down by all other sectors.

On the expenditure side, the two biggest contributors — private consumer spending and gross fixed capital formation, which translates into new productive investment — went down in FY20. Investments contracted for three quarters before Covid-19 (chart 4).

Across the developed and emerging economies, the June quarter has given a mixed reading, with some in the latter group seemingly successful in averting a contraction in the real GDP (chart 5). For India, the fall in GDP could be larger: In the range of 15 per cent to 25 per cent, according to economists (chart 6).

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