InvestorQ : For the GDP advance estimates put out by the government, what are likely to be the positive and negative drivers?
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For the GDP advance estimates put out by the government, what are likely to be the positive and negative drivers?

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Dhwani Mehta answered.
2 months ago
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On 06 January, the National Statistical Office, MOSPI, released the first advance GDP numbers for the fiscal year 2021. Of course, there will be two more advance estimates coming in the next few months. But the good news is that the advance estimate has pegged GDP growth at -7.7, which means lower contraction than anticipated.

If we talk about positive triggers, then there are agriculture and utility services to thank for. In fact, if India is eventually able to achieve -7.7% GDP for FY21, as against the original estimate of -11%, then it is largely thanks to agriculture. The agricultural sector is expected to grow positively by +3.4% in FY21, on the back of solid Kharif and Rabi cropping.

Apart from the higher rural income levels, rural India had faced lower impact of the COVID-19 pandemic. This ensured that purchasing power in rural India was not negatively impacted unlike in urban areas. The other segment that saw positive growth at +2.7% was the public utility services like power, water, gas supply etc on the back of a sharp revival in activity.

But there were a number of actors that were pushing down the GDP numbers. Of course, there were the standard suspects like hotels, trade, transport, construction and other services. The prolonged lockdown had hit tourism & transport sectors substantially and the scope for recovery in this segment is quite limited. This has been the major depressant.

If the services sector has been weak in the first half, the second half may be slightly better if the economic activity picks up. The bigger worry is the construction segment due to its strong positive spill over effects. The lockdown and the financial crunch hit residential demand while commercial real estate demand has been hit by work-from-home (WFH).

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