NEW DELHI, AUGUST 4: The COVID-19 pandemic is taking a heavy toll on the Indian economy with estimates now suggesting that the country’s real GDP may have shrunk by 5% in July as compared to the same month last year, continuing the trend of slowdown that showed more pronounced manifestation in the April-June quarter.
According to EcoScope report from Motilal Oswal Financial Services Limited (MOFSL), e-way bill registration and power generation suggests that real GDP most likely continued to shrink (by 5% (YoY) in July, 2020, which is also confirmed by weak mobility indices (published by Apple and Google).
Moreover, the report said that as the COVID-19 pandemic is still not contained in India and partial lockdowns have been re-introduced in some parts of the country, continuation of stronger GDP growth is still not a given and its progress needs to be closely watched in coming months.
This is bad news for the economy that is looking ahead for better days ahead during the Unlock phase with a Government economic report on Tuesday suggesting that the worst may be over for the economy as high-frequency indicators recovered in June 2020 from unprecedented troughs in April. But even this report has a word of caution : “…risks on account of rising COVID-19 cases and intermittent state lockdowns remain.”
According to the brokerage, India’s real GDP may have contracted 18-20% YoY in 1QFY21. Moreover, there is expectation of another decline of 2-3% YoY in 2QFY21, before real GDP posts growth in 3QFY21.
MOFSL’s Economic Activity Index (EAI) for India’s real GVA (called EAI-GVA) contracted 7.0% YoY in June 2020, its 4th successive decline, which implies that economic activity shrank 18.7% YoY in 1QFY21.
“Although farm activities posted the highest growth in 9 years and the services sector also posted a much-slower decline (supported by massive fiscal spending), industrial activities contracted by a fifth (compared to 33% fall in May 2020) in June 2020,” the report said.(PTI)