India's GDP grows 0.4% in Q3 after shrinking for two quarters: NSO
Published On: Saturday, February 27, 2021 | By: Team KnowMyStock
GDP of India returned to growth (0.4 percent)in October-December after two-quarters of contraction, the National Statistical Office (NSO) said yesterday (26th Feb.2021). In 2020-21, GDP is set to fall 8 percent against an earlier estimate of 7.7 percent, the release said. This is a “reflection of further strengthening of V-shaped recovery”, which began in Q2 of 2020-21, especially after a large GDP contraction in Q1 due to the lockdown, the Ministry of Finance said in a release. However, the cheer may not last because GDP is likely to fall 1.1 percent in Q4 if we triangulate the data available for the first three quarters with the annual estimate. A more surprising fact is that even this likely contraction in Q4 needs 29 percent real growth in government spending. Expenditure by the government fell in Q2 and Q3 when the private corporate and informal sectors in the economy were in pandemic pain, the data shows.
This suggests that economic recovery will be a delayed V-shaped one, with some drag towards the last quarter of FY21, despite the massive spending push of over Rs 4 trillion announced in the Union Budget this year.Consumer spending, which is the driving force behind India’s economy because it accounts for 60 per cent of the GDP pie, fell 2.4 per cent in Q3, refusing to recover, despite the quarter being in the festive season.
Investment, on the other hand, has grown sharper than expected. After a massive fall in Q1, real gross fixed capital formation (GFCF) recovered fast in Q2 and grew 2.6 per cent in Q3.
“The resurgence of GFCF in Q3 was triggered by central government capex, which increased 129 per cent in October, 249 per cent in November, and 62 per cent in December 2020,” the finance ministry said.
Capex induces much higher consumption spending than normal income transfers, the ministry added.
Tags: Indianeconomy GDP
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