India's GDP may contract by 16.5 per cent in April-June quarter of the current financial year as against previously expected contraction of 20 per cent, according to State Bank of India's research report Ecowrap. This was attributed to lower-than-expected degrowth in corporate GVA (gross value added) which has been significantly better than revenue degrowth in Q1 FY21 as far as the results of the listed companies are concerned.
"In principle, revenue decline of listed companies has been far outstripped by cost rationalisation thereby not impacting margins. As per our estimates, Q1 FY21 Real GDP degrowth would be now around -16.5 per cent," said economists at India's largest public sector bank State Bank of India (SBI).
Apart from 'agriculture, forestry & fishing', 'electricity, gas, water supply & other utility services' and 'public administration, defence and other services' almost all other sectors will exhibit declining trend, it said.
So far around 1,000 listed companies have announced their results for June quarter. The results indicate more than 25 per cent decline in revenue and more than 55 per cent decline in profit. However, the decline in corporate GVA was only 14.1 per cent.
SBI's composite leading indicator and monthly acceleration tracker also support the same. The CLI Index (a basket of 41 leading indicators which includes parameters from almost all the sectors) based on monthly data showed early signals of turning-points in economic activity. Based on the leading indicators YoY performance, the GVA degrowth has been expected to be around -14.5-16.5 per cent in Q1 FY21.
Out of the 41 high frequency leading indicators, 11 revealed a significant decline in Q1 FY21, except in domestic tractor sales, bitumen consumption and ASCBs bank deposits, it noted.
The agency, however, raised concerns over rapid rise in coronavirus cases in the rural hinterland. During the months of July and August, coronavirus has now significantly penetrated the rural areas. The percentage of cases in rural districts to total new cases has risen to 54 per cent in August. Also, the number of rural districts with less than 10 cases have reduced significantly.Also Read: COVID-19 fallout: Japan's economy contracts at record pace, GDP declines 27.8%
"Andhra Pradesh and Maharashtra have been impacted more severely with increasing coronavirus penetration in rural areas," it said.
The report estimated total GSDP (Gross State Domestic Product) loss due to COVID-19 to be at 16.8 per cent of GSDP. State-wise analysis indicates that top 10 states accounted for 73.8 per cent of total GDP loss with Maharashtra contributing 14.2 per cent of total loss followed by Tamil Nadu (9.2 per cent) and Uttar Pradesh (8.2 per cent).
"Subsequently, the per capita loss for all India is around Rs 27,000 with states like Tamil Nadu, Gujarat, Telangana, Delhi, Haryana, Goa, etc. exhibiting loss of more than Rs 40,000 per person in FY21. All these numbers do foretell that our earlier GDP estimate at -6.8 per cent has already been significantly overshot in FY21," it added.
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