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India steps out of recession - GDP grows 0.4% in Dec quarter

BusinessToday.In     February 26, 2021

Indian economy reported growth in the December quarter after two quarters of contraction. The nation's Gross Domestic Product (GDP) saw revival, albeit marginally, as economic activities resumed after a long and arduous lockdown and overall sentiment improved with the rollout of vaccination drive.

As per government data, India's GDP increased 0.4 per cent during the third quarter ended December 31, 2020.

"GDP at Constant (2011-12) Prices in Q3 of 2020-21 is estimated at Rs 36.22 lakh crore, as against Rs 36.08 lakh crore in Q3 of 2019-20, showing a growth of 0.4 per cent," Ministry of Statistics & Programme Implementation announced on Friday.

Government data estimated that real GDP in the financial year 2020-21 will decline 8 per cent, as compared to 4 per cent growth in the previous fiscal.

"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 government statement read.

Meanwhile, per capita income in real terms (at 2011-12 prices) during the current fiscal is estimated to be Rs 85,929 as compared to Rs 94,566 in the year-ago period, the government data showed. This indicates a decline of 9.1 per cent during 2019-20, as against 2.5 per cent in the previous year, it further said.

Manufacturing, as expected, staged a comeback during the quarter under review. The sector recorded 1.6 per cent growth during the December quarter this fiscal, as opposed to 1.5 per cent decline in the previous quarter and 2.9 per cent contraction in the year ago period.

"The big surprise in terms of the sectors of production, is the healthy expansion of 6.6 per cent and 6.2 per cent, respectively, in financial, real estate and professional services, and construction. Moreover, the agri growth of 3.9 per cent in Q3 FY2021 is modestly higher than our forecast," noted Aditi Nayar, Principal Economist, ICRA.

"The YoY performance of the components of GDP indicates a welcome growth of 2.6 per cent in gross fixed capital formation, juxtaposed with mild de-growth of 1.1 per cent in government consumption expenditure and 2.4 per cent in private consumption expenditure. The sharp pickup in the capital spending of the Government of India has spurred the growth in gross fixed capital formation in Q3 FY2021, even as state government capital spending contracted, and private sector participation remained uneven and subdued," Nayar further stated.

However, even after the spurt during the festive season last year, private expenditure further contracted in Q3 FY21. This is in accordance with the muted improvement in consumer sentiment as seen in the RBI's latest consumer confidence survey. Meanwhile, revenue spending of the central and the state governments grew in Q3 FY2021. However, government final consumption expenditure component of GDP displayed a mild contraction in December quarter.

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