GDP growth slips to 3.1% in Q4, stands at 4.2 % in full FY20
With the coronavirus-induced nationwide lockdown having impacted the economy, India's gross domestic product (GDP) for the fourth quarter of the financial year 2020 grew at 3.1 per cent, its slowest pace in at least 17 years, according to the official gross domestic product data released on Friday.
Why GDP number is important?
GDP is a key indicator of overall economic activity. A sharp fall in growth means slowing business growth, rising unemployment and thereby increasing stress on the banking sector. The GDP figures are keenly watched every quarter for cues on broader economic performance.
Well, the pandemic has weakened the already declining consumer demand and private investment For the full FY20 financial year, the headline number came down to 4.2 from 6.1 per cent in 2018-19. These figures reveal the pain economy had to undergo as Covid-19 brought all activity to a standstill from the last week of March 2020.
India's eight core infrastructure sectors contract 38.1% in April
According to the Ministry of Commerce & Industry, the growth rate of Eight Core Industries for April declined by 38.1 per cent (provisional) compared to a decline of 9 per cent (provisional) in March. The final growth rate of Index of Eight Core Industries for January 2020 remains unchanged at 2.2%.
The Eight Core Industries comprise 40.27 per cent of the weight of items included in the Index of Industrial Production (IIP).
The estimates of brokerages and economists was that the economy is headed towards a recessionary phase with some even expecting growth to contract over 5 per cent in financial year 2020-21 (FY21). Well, the growth numbers were broadly in line with the estimates.
What did the RBI say in the last policy statement?
RBI Governor Shaktikanta Das last friday said that the GDP growth in India in 2020-21 is estimated to remain in the negative territory with some pick up in growth impulses in the second half of 2020-21 onwards.
"India is seeing a collapse of demand. Private consumption has seen the biggest blow due to the Covid-19 outbreak, investment demand has halted. The government revenues have been impacted severely due to slowdown in economic activity," said the governor.
"Assuming that economic activity gets restored in a phased manner in the second half of this year and taking in consideration favourable base effect, it is expected that combined fiscal, monetary and administrative measures currently undertaken by both the government and RBI create conditions for gradual revival of activities in the second half of 2020-21."
The first Advance Estimates, released in January for Budget preparations, pegged the economic growth rate at 5 per cent in 2019-20. The second Advance Estimates, released on February 28, also projected the FY20 growth rate at 5 per cent, though there were changes in growth in various segments within overall economy and in various quarters compared to that in the first Advance Estimates.
The full impact of the lockdown on manufacturing and services will become more apparent in the June quarter, with Goldman Sachs predicting a 45 per cent contraction from a year ago.
Weather forecasts for normal monsoon rains are in farmers' favour at least, giving hope that the rural sector can help support the millions of migrant workers who returned to their villages from the cities when the lockdown began.
Meanwhile, number of coronavirus affected people in India has crossed 165,799 with 4,706 deaths, with an average daily jump of 6,000 cases in the last one week.