Q4 GDP Data Preview: The COVID-19 pandemic may worsen the job crisis scenario in the country next yearThe economy may have grown in the January-March quarter of the financial year 2020-21, according to estimates by leading rating agencies and economists.For the fourth quarter of fiscal 2020-21, agencies and research reports have suggested that the gross domestic product (GDP) grew in the range of 0.5-2.3 per cent, while the economy could record a contractionbetween 7-8 per cent inthe entire fiscal year.
(Also Read:India's GDP Growth To Be Around 1.3% In March Quarter With Downward Bias: Report)However, the country's economic outlook for the entire fiscal year has weakened, with forecasts suggesting that the impact of the COVID-19 pandemiccould be much deeper, and the job crisis may worsen in the coming year.
The May 20-27poll conducted by news agency Reuterswith29economists, showedthat the economic outlook was loweredto 9.8 per centon average for this fiscal year, down from 23.0 per centand 10.4 per centrespectively a month ago.The consensus indicated healthy growth figures later this year, however, all economists warned the outlook iseither 'weak and prone to further downgrades'or 'fragile, with a limited downside.' None of the analysts expecta 's trong recovery, followed by an upgrade'.
(Also Read:COVID-19 Toll On Economy Deepens, Job Crisis To Worsen: Report)The National Statistical Office (NSO) will release the GDP growth estimates for the fourth quarter (January-March) 2020-21, as well asthe provisional annual estimates for the year 2020-21 on Monday, May 31, 2021.GDP Growth Estimates For Fiscal 2020-211.
Leading domestic credit rating agency ICRA pegged the GDP growth for the March quarter ataround two per cent, and indicated that the economy could register acontraction of around 7.3 per cent for the entire fiscal 2020-21.The agency's growth projection is higher than the eight per cent contraction pegged by the National Statistical Office.
(Also Read:India's GDP Growth In March Quarter To Be Around 2%: Ratings Agency)Aditi Nayar, Chief Economist, ICRA explainedthat the better-than-expected numbers are attributed to thewidespread recovery in volumes from the low base driven by theCOVID-19 nationwide lockdown observed in March 2020.According to Nayar, the gross-value added (GVA) growth in the March quarter, relative to the third quarter, will be driven by the industry (growth of 4.8 per cent compared to 2.7 per cent)and services (growth of 2.7 per cent compared to contraction of one per cent)sectors.2.
The State Bank of India (SBI), in its recent research report titled 'SBI Ecowrap', pegged the GDP growth for the March quarterat 1.3 per cent, with a downward bias.
The state-run bankexpects theGDP decline for the full fiscal year 2020-21to be around 7.3 per cent, compared to theearlier prediction of a7.4 per cent contraction.Meanwhile, the Reserve Bank of India (RBI) Governor-led Shaktikanta Das Monetary Policy Committee,in itsfirst bi-monthly monetary policy review for the new fiscal year 2021-22,retained its GDPgrowth projection at 10.5 per cent forthe current fiscalRate of unemployment due to COVID-19Reflecting the impact of the economic slowdown, the country's unemployment rate soared to a near one-year-high of 14.73 per cent in the week ending May 23, according to the Center for Monitoring Indian Economy (CMIE).
More than85 per cent of economists who participated in the Reuters poll, stated that the unemployment situation in Indiacould worsen over the coming year.Prakash Sakpal, Senior Asia Economist, ING said that there will be asignificant demand shock to the economy, and some of that could lead to permanent demand destruction, pushing more people out of the jobs market, keeping the unemployment rate elevated over the coming year.Rate of InflationThe Reserve Bank, in its bi-monthly monetary policy review on April 7, 2021,maintained its status quo on the key policy rates for the fifth time in a row.
To control the impact of the COVID-19 pandemic on the economy, the central bank is likely to maintain itsaccommodative stance as long as necessary this year, in orderto sustain growth on a durable basis.The central banktargeted the retail inflation at 5.2 per cent in the first half of the current fiscal 2021-22, and mandated to keep itwithin the range of two per cent - six per centband with four per centas a medium-term target.
The RBItracks the retail inflation - or the rate of increase in consumer prices as determined by the consumer price index.According to government data, theretail inflation easedto a three-month low of4.29 per cent in April 2021, being well within the Reserve Bank of India's comfort zone of two per cent - six per cent, for the fifth straight month.
(Also Read:Retail Inflation Eases To 4.29% In April On Decline In Food Prices)Earlier quarters of fiscal 2020-21In the third quarter (October-December), the economy snapped out of technical recessionand expanded by 0.4 per cent, after reporting de-growth in its earlier two quarters, back-to-back, amid the pandemic.Last year, the GDP contracted by a record 23.9 per cent in the first quarter (April- June) of fiscal 2020-21,as an impact of thefirst pandemic-led nationwide lockdown.The GDP contracted by 7.5per cent in the second quarter (July-September)of the fiscal year 2020-21.
It was in the second quarter that the country slipped into a technical recession as the GDP fell for two successive quarters.