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Q3 GDP growth: Will the slowdown end today?

Due to some improvement in many high-frequency indicators in the October-December quarter, it seems the deceleration in the economy has stopped and also bottomed out

Manoj Sharma   New Delhi     Last Updated: February 28, 2020  | 16:40 IST
Q3 GDP growth: Will the slowdown end today?
The GDP growth slowed in Q2 to a six-year low of 4.5 per cent.

With the Central Statistics Office (CSO) set to release the GDP (Gross Domestic Product) numbers for the third quarter today, initial forecasts seem to suggest gloomy days may finally be over and Indian economy could show signs of recovery after six quarters of continuous fall in the GDP. Many financial institutions and rating agencies say the GDP numbers will see a rebound. The reasons are an uptick in rural demand, spending in government schemes and private consumption. Due to some improvement in many high-frequency indicators in the October-December quarter, it seems the deceleration in the economy has stopped and also bottomed out.

Notably, the GDP growth slowed in Q2 to a six-year low of 4.5 per cent due to subdued expansion in agriculture, manufacturing, and government expenditure. The Indian economy grew at 5 per cent in Q1 of FY20, falling from 5.8 per cent in Q4 of FY19. The economic growth had plunged 2.2 per cent in FY19 alone -- from 8 per cent in Q1 FY19 to 5.8 per cent in Q4 that year.

Also read: Will it be another frightful Friday? Finance Minister will keep fingers crossed

For Q3, estimates suggest the Indian economy fared slightly better in the quarter ending December before suffering a relapse after the global impact of coronavirus started showing. While some are conservative in their approach, others predict little improvement in the quarter.

State Bank of India says India's GDP growth will remain flat at over six-year low of 4.5 per cent in Q3 of FY20. DBS Bank pegs the December quarter growth at 4.4 per cent. YES Bank also says the growth will remain flat at 4.5 per cent.

Also read: Q3 GDP likely to be 4.5%, FM should not be surprised: Chidambaram

But the Central bank has estimated the GDP to rise to 4.9 per cent from 4.5 per cent in the previous quarter. HDBC Bank says the GDP in the third quarter will likely grow at 4.8 per cent. IDFC First Bank believes there'll be a slight improvement in the GDP growth at 4.6 per cent. CRISIL, however, forecasts Q3 GDP breaching the 5 per cent-mark. CRISIL's forecast of the real GDP growth in fiscal 2021 is also at 6 per cent. ICRA and FICCI also pegged the growth accelerating to 4.7 per cent. The median forecast of a Reuters poll of economists also put annual economic growth at 4.7 per cent in the December quarter. A Bloomberg poll suggests the country's GDP growth rising to 4.7 per cent. Economists at Barclays Plc also believe the economy doing better in the quarter at 5 per cent.

"With mild traction in the leading indicators, GDP growth for Q3FY20 is likely to remain subdued but might show minor acceleration from 4.5% YoY to 4.6% - 4.7 per cent," said Sparsh Chhabra, Economist, at Centrum.

Though some signs of recovery are visible, economists believe the Indian economy will remain under strain due to coronavirus outbreak in China, which has crippled the global supply chain. This will have a major impact on several Indian industries, including electronics, consumer durable, automobile, pharma, apparel, among others. India imports from China stood at $56 billion in 2019.

Also read: Q3 GDP growth to be announced Friday; SBI report warns of coronavirus impact

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