Statsguru: Decoding Indian economy's growth risks and muted outlook

The stress lies in the manufacturing and construction sectors, the biggest employers of semi-skilled labour

The latest data has darkened the outlook for the Indian economy. The National Statistical Office’s estimate and projection puts gross domestic product (GDP) growth at 4.7 per cent in the second half of FY20 (Chart 1). 

The stress lies in the manufacturing and construction sectors (Chart 2), the biggest employers of semi-skilled labour. Farm sector in Q4 could register the best growth in three years, but public spending is likely to moderate (Chart 2). 

Further, numbers show a deeper collapse in investments. However, the annual estimate of 5 per cent growth has been retained, courtesy a likely uptick in investments in Q4 (Chart 3). 

The impact on the economy may be visible going forward, as the incentive to borrow is slowly rising with softening longer-term bond yields. (Chart 4). But the outbreak of a deadly virus in China could affect the outlook for growth. 

The immediate impact has been on stock markets across the world, as Chart 5 shows. Chart 6 shows how the demand for various goods and services are expected to decline due to Covid-19 spread. 

Pharma prices are rising, auto parts movement could stall, and global trade can suffer, analysts concur. Indo-China trade in heavy machinery, gems and jewellery, and chemicals could get affected the most, a recent Crisil report noted (Chart 7). 

China’s growth will decline and will be a drag for global growth (Chart 8). However, India’s trend growth diverged from global growth after disruptions like demonetisation and the implementation of goods and services tax. Due to low base (lower growth in FY20), India’s growth in FY21 could see an uptick despite Covid-19 impact, most forecasts show. 
StatsGuru is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines: Compiled by BS Research Bureau