INSTANT VIEW 3- India's economic growth picks up to 1.6% y/y in Jan-March quarter

BENGALURU, May 31 (Reuters) – India’s economic growth picked up to 1.6% year-on-year in the January-March quarter, official data showed on Monday, before a harsh second wave of COVID-19 hit the country last month.

The read-out for the March quarter was faster than the 1.0% growth forecast of analysts in a Reuters poll and upwardly revised 0.5% growth rate for the previous quarter.

COMMENTARY

SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM

“Looking forward, while the y/y numbers for the first quarter might look upbeat due to a low base, the sequential growth is likely to contract. In particular, with the spread of the virus more acute in rural areas in this wave, rural demand and sectors dependent on the rural economy might come under stress.”

“With a more muted rural support this year, along with ongoing supply disruptions, we expect GDP growth at 8-10% for FY22, revised down from our earlier estimate of 11.5%.”

GARIMA KAPOOR, ECONOMIST – INSTITUTIONAL EQUITIES, ELARA CAPITAL, MUMBAI

“The Q4FY21 GDP growth of 1.6% reflects the full impact of unlocking of the economy post COVID-19 shock (of first wave). While the second wave of infections has been much more severe, the absence of a stringent nationwide lockdown has been a positive.”

“The impact during the second wave has been more pronounced on consumer sentiment and mobility rather than economic activity. The rebound in consumer spending would hence be more gradual than the first wave with vaccination being the key driver. We expect FY22 GDP growth at 10.5% vs our earlier estimate of 12.5%.”

MADHAVI ARORA, LEAD ECONOMIST, EMKAY GLOBAL FINANCIAL SERVICES, MUMBAI

“The better-then-expected growth print partly owes it to healthy corporate results in March quarter of FY21. We admit the situation is still in a flux, and it is too nascent to gauge the true impact of the second wave on macro variables. We believe that the impact is unlikely to be of the same magnitude as last year.”

“Clearly, factors such as better adapted firms and policy response, stable financial conditions and robust global growth spillovers create growth buffers back home. However, credible vaccine drive remains key. The faster the vaccine traction, the faster would be the delinking between mobility and virus proliferation.”

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