India's Q1 GDP reveals deep malaise; SBI sees real GDP contracting 10.9% in FY21

India's GDP growth plunged to 23.9 per cent in April-June quarter of the current fiscal. After reporting worst-ever growth performance in last 24 years, question arises how the economy will perform in subsequent quarters. According to State Bank of India's research report, real GDP is expected to shrink by 10.9 per cent in FY21.

As per the SBI Ecowrap, all the remaining three quarters will see negative real growth, while July-September quarter is likely to witness decline in double digits. It pegged Q2 FY21 real GDP decline in the range of -12 per cent to -15 per cent, while Q3 GDP is seen between -5 per cent and -10 per cent. January-March quarter (Q4 FY21) is expected to be in -2 per cent to -5 per cent range.

The report, however, highlighted two positives amidst all these numbers.

First, the RBI sector-wise credit data for July showed rise in credit in all major sectors, barring industry. There has been a significant increase in credit to MSE (micro and small enterprises), agriculture and allied and personal loans. Adding to it, banking sector has largely been able to insulate from the disruption caused by coronavirus pandemic due to technology integration.

Also Read: Drop in Q1 GDP on expected lines; India on a V-shape recovery path: CEA K Subramanian

Second, some of the sectors where new projects announcements were seen during the first quarter include roadways, basic chemicals, electricity, community services such as hospitals, water sewage pipelines, it said.

The SBI report said that there is a need to revive sectors such as construction, trade and hotels, aviation. Restoring transportation services and giving push to infrastructure by issuing special bonds to the RBI like perpetual bonds must also be explored apart from supporting states through fiscal measures in their endeavour.

Also Read: India's GDP contracts 23.9% in Q1; construction, manufacturing, trade bear the brunt

The Indian economy reported its worst quarterly performance in the first quarter of the current fiscal as the coronavirus-triggered nationwide lockdown disrupted activities across manufacturing, construction and service sectors like hotels and transportation. This was dented by sharp de-growth in three key production sub-sectors, namely 'manufacturing', 'construction', and 'trade, hotels, transport, communication and services related to broadcasting', which account for as much as 45 per cent of India's GDP.

Also Read: India's Q1 GDP data: Has India entered recession?

Manufacturing, construction and trade sectors reported massive slump of 39.3 per cent, 50.3 per cent, and 47 per cent, respectively, as per the data released by the National Statistical Office (NSO) on Monday. Agriculture was the only sector that reported positive growth of 3.4 per cent on the back of good monsoon and robust kharif sowing and rabi production.