Rating agency ICRA has forecast a pick-up in the growth of the Indian GDP (at constant 2011-12 prices) to 2 per cent in Q4 FY21 from 0.4 per cent in Q3 FY21, suggesting that the double-dip recession implied by the National Statistics Office (NSO) for Q4 FY21 was averted. The YoY growth of gross value added (GVA) is expected to have risen to 3 per cent in Q4.

The domestic rating agency has pegged the contraction in GVA at basic prices and the GDP (at constant 2011-12 prices) in FY2021 at 6.3 per cent and 7.3 per cent, respectively.

“With a widespread recovery in volumes benefitting from the low base of the onset of the nationwide lockdown in March 2020, we project the growth of the GVA at basic prices to have improved to 3 per cent in Q4 FY2021. Moreover, we peg the GDP growth for the just-concluded quarter at 2 per cent,” said Aditi Nayar, chief economist, ICRA Ltd.

“We have forecast GDP growth to trail the GVA expansion in Q4 FY2021, on account of the assessed impact of the backended release of subsidies by the government of India (GoI). Given the latter, we believe that the trend in the performance of the GVA may be a more meaningful gauge of India’s economic recovery in Q4 FY2021,” added Nayar.

Benefitting from the low base, manufacturing volumes recorded a 12-quarter high growth of 5.8 per cent in Q4 FY2021 (-6.3 per cent in Q4 FY2020), while continuing to trail the pre-COVID levels. With the vaccine optimism fuelling a rally in global commodity prices, higher raw material costs are expected to have compressed margins to an extent in some sectors.

On balance, the growth in manufacturing GVA is projected to increase to 4 per cent in Q4 FY2021 from 1.6 per cent in Q3 FY2021. “Nevertheless, the extent of recovery in the performance of the informal sectors in Q4 FY2021 remains uncertain, and we continue to caution that trends in the same may not get fully reflected in the GDP data, given the lack of adequate proxies to evaluate the less formal sectors,” added Nayar.

However, if the aforesaid expenditure is booked as subsidy, it would widen the wedge between the GVA expansion and the GDP growth. Nevertheless, ICRA said in the report that it does not expect the GDP to have slipped into a contraction in Q4 FY2021.

Fibre2Fashion News Desk (KD)

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