India’s real GDP expected to contract by 5.2 pc in FY21: Motilal Oswal

Mumbai, September 1 (ANI): While the real gross domestic product (GDP) contracted by 23.9 per cent and gross value added (GVA) by 22.8 per cent in the first quarter of current financial year, the real GDP turnaround from contraction to growth in late calendar year 20 may be much slower than expected, Motilal Oswal Financial Services said on Tuesday.

It expects another contraction in the second quarter. Following the last quarter’s worse-than-expected contraction, Motilal Oswal has now revised the forecast for GDP decline to 5.2 per cent year-on-year in FY21 followed by 8 per cent growth in FY22.

On a quarterly basis, it expects real GDP to contract by another 4.5 per cent in Q2 and grow by 1.3 per cent and 5 per cent in Q3 and Q4.

In its EcoScope report, the financial services firm said while a contraction in GDP was obvious, the actual fall of 23.9 per cent in Q1 was surprising. It was largely attributed to deeper decline of 26.7 per cent in private consumption expenditure and a 47.5 per cent decrease in gross capital formation.

On the positive side, government consumption remained robust with growth of 16.4 per cent, the highest in 12 quarters. Moreover, external trade posted a surplus, contributing a positive 6 per cent to real GDP.

Assuming a growth of 8 per cent in the pre-Covid-19 or normal scenario, a contraction to this extent implies output loss of Rs 15 lakh crore.

Higher than market consensus of minus 18.8 per cent, real GVA contracted by 22.8 per cent. The only component that contributed positively to real GVA was agriculture with 3.4 per cent in Q1. Further details suggest real GVA excluding agriculture contracted 26.8 per cent year-on-year. (ANI)

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