A motorcyclist is wearing a protective mask sitting on the side of the road on the banks of the Sabarmati River in Ahmedabad, India, on Thursday, October 22, 2020.
Sumit Dayal | Bloomberg | Getty Images
India’s economy is expected to have grown at a record pace in the three months ending June, but analysts point out that the data is unlikely to be able to provide a complete picture of the country’s growth trajectory.
More than 40 economists surveyed by Reuters this month predicted that gross domestic product would rise 20% year-on-year during the period from April to June, India’s first fiscal quarter. Official data is due to be released on Tuesday around noon GMT. India’s fiscal year begins in April and ends in March of the following year.
“The main number of GDP growth from April to June … will flatter to deceive,” said Shuchita Shukla, a research analyst at The Economist Intelligence Unit.
If the 20% forecast is met, it would be India’s fastest growing rate since the country began measuring quarterly GDP in 1996. However, Tuesday’s data comes after India faced a sharp contraction. in the comparable period of the previous year, when most of the country was under strict national closure. India’s economy contracted by 24.4% during these three months.
Shukla said the projected year-on-year growth of the EIU exceeds 25%, higher than the estimate agreed in the Reuters poll. “More revealing will be the quarter-on-quarter rate, which we hope will show that India’s economy contracted 7% amid a devastating second wave of Covid-19.”
In the three months between January and March, India’s economy grew by 1.6% compared to the previous year.
India battled a severe wave of coronavirus infections between February and early May, when cases peaked. The resurgence forced most of India’s industrial states to implement localized blocking measures to curb the spread of the virus.
But India avoided a national blockade. Economists said it probably cushioned the blow, but consumption probably still lost momentum.
“The humanitarian costs of the health crisis were immense, but the economic impact was less severe than the first wave and activity rebounded faster,” said Radhika Rao, senior economist at Singapore’s DBS group.
A full recovery in consumption is likely to take time, as pressured balances enter the pandemic and additional labor market scars during Covid.
He noted in a note on 23 August that India’s agricultural production remained resilient, that domestic tractor sales recovered in June and that rural wages benefited from a number of factors, including support plans. in employment.
Construction activity remained somewhat operational, in part due to more localized closures, while some service sectors, such as hotels, were more affected than others.
“A full recovery in consumption is likely to take time, as pressured balances enter the pandemic and additional labor market scars during Covid,” Rao said.
While India opens more cautiously after the second wave, economists say the risk of a third wave remains. But its impact on the economy is expected to be less severe compared to the first and second wave. Some pockets in the country are experiencing high levels of infection, according to media reports.
EIU’s Shukla noted that monthly data show that the Indian economy is likely to return to decent quarterly growth during the period July to September.