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While the slump may have reached its bottom, the downside risks to the global growth as a result of the coronavirus outbreak is still unfolding.
India’s GDP growth in full FY19 had stood at 6.8 per cent.
Here’s how economists and Dalal Street experts reacted to the GDP data:
Abheek Barua, Chief Economist, HDFC Bank
The 4.7% growth is in line with economists’ expectations. However, with a likely impact of the coronavirus beginning to play out in the last quarter and expenditure compression by the government, last quarter GDP growth could disappoint. This could mean that GDP for the year could be lower than 5%. The coronavirus remains the critical risk as India depends on China for both demand and supply of inputs. The case for an early rate cut despite adverse inflation optics remains and globally central banks might have to go in for aggressive monetary easing to offset a pandemic led recession.
Sreejith Balasubramanian, Economist – Fund Management, IDFC AMC
Inventory restocking and base effects could make some of the numbers appear better, but we believe a meaningful recovery could be further away as both demand and credit supply continue to remain weak. India’s growth could be impacted by coronavirus depending on the duration and intensity of both its spread and containment measures across the world. While India’s direct trade linkage to China and Hong Kong is at 9 per cent of total exports and 17 per cent of total imports, supply chain disruptions and lower external demand would add to domestic issues and continued risk-off capital outflows could put pressure on EM currencies, although the RBI has been shoring up FX reserves. However, expectations of global monetary policy easing has already started rising amidst the uncertainty which still looms large.
Madhavi Arora, Lead Economist, Fx And Rates, Edelweiss Securities
With Asia growth being suppressed in 4QFY20 amid COVID-19 impact, external demand spillover to India amid supply disruptions would weigh marginally on India’s near-term growth. It appears growth slowdown is not just cyclical but more entrenched with consumption secularly joining the slowdown bandwagon even as investment story continues to languish. Factors including still-tight financial conditions, weakening household and corporate balance sheet, sluggish private capex and lack of business confidence, possible slower public capex amid fiscal constraints continue to weigh and require continued innovative policy levers both from India’s government and the RBI.
Rupa Rege Nitsure, Chief Economist, L&T Financial Holdings
The only silver lining in the overall picture of gloom and doom is the steadily improving growth of agriculture and allied activities. This sector, besides the government spending on public administration, has prevented the growth from sliding further. The revisions in previous quarter numbers do happen routinely with better availability of data. I don’t think that should materially change anything. Manufacturing has been falling consistently as per the IIP data and the real weak spots are manufacturing, especially capital goods, construction, trade and financial services.”
Madan Sabnavis, Chief Economist, Care Ratings
The Central Statistics Office has not considered the coronavirus in their estimates, which can impart a downward bias to the GDP growth projection of 5% for the year, as Q4 has to register a very high growth rate of 5.5%+ given the three quarterly numbers of 5, 4.5 and 4.7%. The numbers are otherwise on expected lines with disappointing growth in manufacturing and the push coming from services, especially the government. Investment still is down and unlikely to recover in Q4
Radhika Rao, Economist, DBS Bank
Q3FY20 GDP was largely in line with consensus, with notable revisions to 1Q and 2Q data. Strength in private consumption surprised on the upside, but the drag from investments persist as capacity utilisation remains sub-par. With global risks on the rise and a challenging trade/ manufacturing outlook in 4QFY owing to the COVID-19 developments, production might face some headwinds in 4QFY. Hopes are high that as China gradually returns to work, supply disruptions will abate and production will play catch-up to normalise prices and supplies in 1QFY21.
Sujan Hajra, Chief Economist, Anand Rathi Securities
While the GDP growth is slightly better quarter over quarter, after the revision it is a drop again. But the situation seems to be improving. Private consumption has improved. Investment degrowth remains an area of concern. While monetary policy will be supportive of growth, given the higher retail inflation in January it will be difficult for the RBI to act in the near-term.”
Shashank Mendiratta, Economist, IBM
The slowdown was led by contraction in investment for the second straight quarter. Private consumption growth also eased slightly after a recovery during Q2FY20. However, government spending remained the mainstay, growing in double digit for another quarter. Looking ahead, high frequency indicators continue to show a mixed outcome suggesting that the growth recovery may be shallow. Even as India is relatively less exposed to economic implications from the coronavirus in China, the disruptions need to be monitored in sectors which are dependent on inputs from China. Nonetheless, India’s exposure is limited due to lack of participation in supply chain.
Devarsh Vakil- Head, Advisory (PCG), HDFC Securities
The data suggests the slowdown has bottomed out and measures taken by the government in the recent budget to improve capacity to spend in rural sector, infrastructure creation and inviting foreign investments will boost growth going ahead. Latest policy tools brought in by RBI (LTRO) and postponement of Gilt maturities through operation twist have added significant monetary stimulus to the financial system. The fast-spreading coronavirus outbreak will shave some points from global growth, though we expect a coordinated response from central bankers to unleash liquidity to counter the effects of slowdown. It should also add tailwinds to the growth recovery whenever the virus spread is contained.
Karan Mehrishi, Lead Economist, Acuité Ratings & Research
Q3 print is in line with our expectations. Even though a favourable base did play a role in the slight improvement in quarterly value added, it is heartening to see green shoots in household consumption and capital formation. Nevertheless, a tight fiscal space is constricting public expenditure, which has reported a lower contribution of GDP this quarter. Industry wise, agro and allied, public administration and mining have shown encouraging performance in Q3 along with financial services. On the other hand, manufacturing and electricity and to an extent construction related sectors continue to exhibit contractionary tendencies.
Rahul Bajoria, Chief India Economist, Barclays
The upward revisions in historical data present a complicated picture of growth, even though high frequency data is improving. We reckon a modest recovery continues to stay intact, and will gather some more steam in coming months despite mounting global risks.
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