As India Enters Technical Recession, Here’s What Experts Say

Here’s how experts from major business publications have responded to India’s GDP dip in the second quarter.

Updated
India
3 min read
With two straight quarters of GDP contraction, India is has fallen into a technical recession — the first since India began releasing quarterly estimates of GDP in FY98.
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India’s GDP figures in Q2 indicates that the country is in technical recession — where you report two consecutive quarters of negative growth. The Quint went through the major business publications to find how experts are looking at India’s economical situation.

The Road to Recovery Will be Long, Reports CNBC

“While most countries responded to the pandemic with a mix of fiscal and monetary policy, India’s response was largely monetary and only slightly fiscal,” Kunal Kumar Kundu, India economist at Societe Generale told CNBC. He said that “inadequate fiscal response” has resulted in the lockdown failing to flatten the infection curve.

“In relative terms, India could still emerge as one of the fastest-growing economies despite weakened growth potential.”
Kunal Kumar Kundu, India economist at Societe Generale to CNBC

Second-Quarter GDP Growth is Better Than Expectation: ET

“The second-quarter GDP growth number is better than our expectation,” Anagha Deodhar, Economist, ICICI Securities told the Economic Times. She added that while growth in most segments was along expected lines, the performance of two sectors surprised on the upside – manufacturing and trade, hotels and transportation.

“The resurgence of COVID cases in many geographies poses a risk to economic revival in the coming quarters. We expect growth to remain negative in the third quarter and post a small positive growth in Q4.”
Anagha Deodhar, Economist, ICICI Securities to ET

Q2 GDP at -7.5% Beats Estimates, Reports Money Control

“The key thing to watch out for is the time services will take to come back to normal,” Dhiraj Relli, MD & CEO at HDFC Securities told Money Control. He further added that equity markets could open higher on Tuesday reflecting the positivity of the Q2 GDP numbers.

“Manufacturing growth has come in much stronger than expected. This will entail revising downward the full year GDP contraction forecasts. The key thing to watch out for is the time services will take to come back to normal and whether manufacturing growth reflects restocking/pent-up demand or is reflective of normal demand conditions which have revived sustainably.”
Dhiraj Relli, MD & CEO at HDFC Securities to Money Control.

Experts Hope For Faster Rebound: Business World

“The possibility of a release of several highly effective vaccines soon gives us hope that there is an end date to the pandemic,” the Business World Quoted Rumki Majumdar, Economist, Deloitte India.

She said that inclusive job growth, a robust services sector rebound, and a sustained recovery in private demand can ensure a sustained economic revival.

“Three drivers will ensure a sustained economic revival and rehabilitation; inclusive job growth, a robust services sector rebound, and a sustained recovery in private demand. Stimulus announcements by the government, liquidity measures by the RBI, and difficult reforms (such as the labour and agricultural reforms) will aid in all three in the months ahead.”
Rumki Majumdar, Economist, Deloitte India to Business World

A Short-Lived Recession? Bloomberg Quint Analyses

The recession may prove to be short-lived with economists pointing to the better-than-expected performance in the July-September period, which may help the economy contract less than earlier feared, reported Bloomberg Quint. A lower than estimated contraction in the second quarter could signal a faster return to growth, Rahul Bajoria, chief India economist at Barclays told BQ.

“Excluding agriculture and government spending, GDP fell by 8.1% annually in Q2, indicating that private sector activity is no longer significantly weaker than the farm or the government sector. If the recovery stays on track, we expect the economy to return to positive growth as early as Q3, a quarter ahead of the central bank’s current projection.”
Rahul Bajoria, chief India economist at Barclays to Bloomberg Quint

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