Indian economy may have contracted by 25% in Q1: ICRA

28 Aug '20

2 min read

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India’s gross domestic product (GDP) may have contracted by 25 per cent in the April-June quarter, according to analysts. While ratings agency ICRA pegged the contraction and the gross value added (GVA) at basic prices in year-on-year (YoY) terms in the first quarter at around 25 per cent each, Barclays estimated the economy to have contracted by 25.5 per cent in that quarter.

The drag is primarily on account of three key production sub-sectors accounting for 45 per cent of the economy—manufacturing; construction; and trade, hotels, transport, communication and services related to broadcasting, ICRA said.

These segments will be the worst affected in the official set of numbers to be announced by the government on August 31, say analysts.

Barclays said the rural economy, government spending and essentials will likely be the only sectors mitigating some of the decline. While the worst will be over in the June quarter, growth is likely to remain weak going forward as well, and estimated the 2020-21 GDP to contract by 6 per cent, it was quoted as saying by a news agency report.

Manufacturing volumes are likely to contract by 40.7 per cent YoY, the construction sector by gross value added growth 45 per cent, ICRA said.

The revenue expenditure of a small set of state governments for which data is available shows an expansion of 18.5 per cent in the first quarter of 2020-21, the rating agency said. It added that coupled with a 9.7 per cent growth in the Government of India's non-interest revenue expenditure in the first quarter of this fiscal, this would support the overall economic performance in the quarter.

The agriculture sector will come at five per cent in the first quarter of 2020-21 as against the 3 per cent growth in the corresponding quarter of the previous financial year.

Fibre2Fashion News Desk (DS)

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