India has officially exited the technical recession phase that was brought about by the Covid-19 pandemic, with official data on Friday showing that the country’s Q3FY21 GDP grew by 0.4 per cent.
Though not comparable, the GDP had grown by 3.3 per cent in the corresponding quarter of FY2019-20.
India had entered technical recession after its GDP consistently remained in negative output territory for two subsequent quarters. Notably, the Q2FY21 GDP on a year-on-year basis had contracted by 7.3 per cent from (-) 24.4 per cent in the preceding quarter.
The economy was hit hard last year by the lockdown imposed to curb the spread of Covid-19. As such, mobility restrictions mandated under the lockdown led to the contraction at this scale.
It was only on June 1 that the partial unlock measures were implemented.
As per the National Statistical Office (NSO), the growth in GDP during 2020-21 is estimated to contract by 8 per cent as compared to a growth of 4 per cent in 2019-20.
“The real GDP or Gross Domestic Product (GDP) at constant (2011-12) prices in the year 2020-21 is estimated to attain a level of Rs 134.09 lakh crore, as against the ‘First Revised Estimate of GDP’ for the year 2019-20 of Rs 145.69 lakh crore, released on January 29, 2021,” the NSO said in its estimates of Q3FY21 GDP.
“The measures taken by the government to contain the spread of the Covid-19 pandemic have had an impact on the economic activities,” it said.
In terms of quarterly Gross Value Added (GVA), the NSO data showed a year-on-year rise of 1 per cent from (-)7.3 per cent in Q2FY21.
The GVA includes taxes, but excludes subsidies.
On a sequential basis, Q3 GVA for 2020-21 from the agriculture, forestry and fishing sector rose to 3.9 per cent growth, against 3 per cent in the preceding quarter of 2020-21.
The GVA in Q3 2020-21 from the manufacturing sector grew 1.6 per cent, as compared to a de-growth of (-) 1.5 per cent in Q2FY21.
Similarly, the electricity, gas, water supply & other utility services sector showed a growth of 7.3 per cent from a rise of 2.3 per cent in Q2FY21.
Furthermore, the data showed that Gross Fixed Capital Formation (GFCF) rose 33 per cent from 31.8 per cent in Q2FY21.
“With a growth re-emerging in both GDP and GVA in Q3FY2021, the pandemic-induced technical recession in India has ended…,” said Aditi Nayar, Principal Economist, ICRA.
“Intriguingly, GDP is implicitly projected by the NSO to slip back into a contraction of 1.1 per cent in Q4 FY2021, which may be an unintended consequence of the back-ended release in the Government of India’s subsidies.”
Nayar said that various lead indicators have recorded a loss of momentum so far in Q4 FY2021, in contrast to the improvement in sentiment brought on by the vaccine rollout.
“We expect consumption growth to strengthen only modestly in the near term, as a part of the healthier income generation is used to rebuild the savings buffers that were drained during the lockdown by those in the informal sector, contact intensive industries and the self-employed.”
Sunil Sinha, Principal Economist, India Ratings and Research, said: “Despite growth returning 3QFY21, the second advanced estimate of NSO pegs the FY21 GDP growth at negative 8 per cent as compared to first advanced estimate of negative 7.7 per cent.
“This indicates that despite GDP growth returning to positive territory in 3QFY21, the recovery is likely to slower than anticipated earlier. Along with 3QFY21 GDP estimates, estimates for 1QFY21 and 2QFY21 have undergone changes, which suggest that the compression was sharper than earlier estimates and recovery is also sharper than earlier estimated.”