InvestorQ : Was the fall in GDP as per market expectations or was it worse than that?
Sam Eswaran made post

Was the fall in GDP as per market expectations or was it worse than that?

Dinesh C Nagpal answered.
3 years ago

It was v much within expected lines. Market had already discounted it. What market is looking forward to is improvement from here onward with easing and liquidity being pumped in. The market will react negatively in case we have another COVID surge or inflation goes out of control


diksha shah answered.
3 years ago

In a nutshell, the GDP contraction for Jun-20 quarter was worse than anticipated. The GDP for the Jun-20 quarter contracted by -23.9% due to COVID-19 pandemic. However, the bigger worry is that in absolute terms that is a fall of Rs.845,000 crore of national income.

In comparison to the consensus estimates, the actual GDP number was 450 bps worse. This raises doubts over whether the economy would be really able to bounce back from the third quarter or whether the slowdown will last longer than that.

No surprises for guessing, but the pressure was visible on trade, hotels and construction activity. Construction activity saw -50% contraction in the Jun-20 quarter on weak demand, labour shortages and supply chain disruptions. Nobody, really wanted to buy.

The manufacturing sector with 26% weightage contracted by -39%. That was because most of the factories opened only in June and a per the high frequency data are only now getting back to about 85% of normal production schedules.

What is a tad disconcerting is that the public services, including defence and social sector spending, also saw -10% contraction indicating pressure on government finances. This segment had been a driver of GDP for the last few quarters.

In a way, farmers saved the day for India GDP in the Jun-20 quarter. The agriculture sector showed a positive growth of 3.4% in the Jun-20 quarter. This is the worst GDP contraction since GDP records were maintained and the first contraction in GDP since 1979.