Real GDP may have contracted up to 20% in Q1: Motilal Oswal report

India's real gross domestic product (GDP) is estimated to have contracted nearly 18-20 per cent  on-year in the April-June quarter of fiscal 2020-21 amid the ongoing coronavirus crisis, according to a report. Similarly, the GDP may have shrunk 5 per cent (YoY) in July as muted e-way bill registration and power generation suggest, according to the EcoScope report from Motilal Oswal Financial Services Limited (MOFSL).

Real GDP is an inflation-adjusted measure which reflects the value of all goods and services produced by an economy in the year under review, expressed in base-year prices.

"The important point to ponder over now is whether economic activity will start picking up from Aug-Sep'20 and continue to grow post the festive season. As the COVID-19 pandemic is still not contained in India and partial lockdowns have been re-introduced in some parts of the country, continuation of stronger GDP growth is still not a given. Therefore, its progress needs to be closely watched," the report added.

"Although farm activities posted the highest growth in nine years and the services sector also posted a much-slower decline (supported by massive fiscal spending), industrial activities contracted by a fifth (compared to 33 per cent fall in May 2020) in June 2020," the report added.

A fall of 33 per cent in steel production and an expected decline of nearly 25 per cent YoY in manufacturing IIP suggest continuation of weak industrial activities, it noted.

Meanwhile, a longer wait for a vaccine against coronavirus may lead to a contraction of up to 7.5 per cent in the Indian GDP in FY21, said a recent report by Bank of America Securities. "India's real GDP will likely contract by 7.5 per cent if the global economy has to wait for a vaccine discovery for a year," the BofA analysts said.Also read: H1-B visa: Trump signs executive order to restrict hiring of foreign workers

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