Aditi Nayar
Principal Economist, ICRA Ltd
Aditi Nayar
Principal Economist, ICRA Ltd
GDP plunge in lockdown quarter in line with ICRA expectation
As expected, GDP and GVA plunged in the lockdown-ridden quarter of Q1 FY2021, printing similar to our forecast of a 25% contraction.
Private final consumption expenditure, the mainstay of the economy, shrank by 26.7% in Q1 FY2021, with economic uncertainty, income and job losses, and feeble remittances curtailing spending.
Unsurprisingly, gross fixed capital formation nearly halved in Q1 FY2021, with sentiment, investment intentions and project completion battered by the lockdown, even as government capital spending grew on a small base.
Government final consumption expenditure (GFCE) recorded a five-quarter high expansion of 16.4% in Q1 FY2021, preventing a deeper de-growth in GDP. Excluding GFCE, GDP contracted by nearly 30% in Q1 FY2021, highlighting the harsh of the economic situation during the Covid-19 crisis.
With infections continuing to climb and some states extending local lockdowns further, we maintain our forecast that the Indian economy will contract by 9.5% in FY2021.
