Oxford Economics ups India growth forecast to 10.2% for 2021

Source: The Economic Times, Feb 17, 2021

Global forecasting firm Oxford Economics on Wednesday revised India‘s economic growth projection for 2021 to 10.2 per cent from the earlier 8.8 per cent, citing receding COVID-19 risks and the shift in the monetary policy outlook. It further said the Budget 2021-22 will create positive externalities for the private sector, and forecast slower fiscal consolidation in FY22 than the government projections.

“Alongside the planned government spending boost in Q1 and receding Covid-19 risks, the shift in the monetary policy outlook supports our 2021 growth upgrade to 10.2 per cent from 8.8 per cent earlier,” Oxford Economics said.

The forecasting firm also noted that India’s latest Union Budget has raised hopes that fiscal policy will finally pick up the growth baton and ease pressure on the RBI to continue to lead the pandemic policy response. “We think the budget proposals will create positive externalities for the private sector, and forecast slower fiscal consolidation in FY2022 than the government projects.

“A proposed increase in capital expenditure should also lower the contractionary impact of the consolidation on GDP,” it said. Oxford Economics noted that if inflation risks materialise, the RBI may have to renege on its growth commitment, which is a downside risk to its growth forecast.

It said the Budget has been largely perceived as supporting growth, despite a projected narrowing of the fiscal deficit from 9.5 per cent of GDP in fiscal 2020-21 (ending March 2021) to 6.8 per cent in 2021-22. “In all, we do see merit in the view that the budget is growth-oriented and expect the positive spillover impact on the private sector to help nurture the ongoing recovery,” it said.

The Economic Survey has projected an 11 per cent growth for 2021-22, aided by a V-shaped recovery and a 7.7 per cent contraction for the current year. It also projects a lower 6.8 per cent growth in 2022-23. The Reserve Bank of India has projected a GDP growth rate of 10.5 per cent for the financial year beginning April 1, on the back of recovery in economic activities.

Economic activity on verge of normality, GDP to grow 13.5% in FY22: Report

Source: The Economic Times, Feb 16, 2021

MUMBAI: Economic activity is on the “verge of normality” after getting severely hit by COVID-19 and Indian GDP will grow at 13.5 per cent in FY22, a Japanese brokerage said on Monday.

The Nomura India Business Resumption Index (NIBRI) picked up to 98.1 (provisionally) for the week ending February 14, from 95.9 in the preceding week, Nomura said.

The economic impact of the pandemic is set to lead the country’s GDP to contract by 7.7 per cent in FY21, and the RBI expects the GDP to contract by 7.7 per cent in FY21, and the RBI expects the GDP to jump by 10.5 per cent in FY22.

The brokerage said it expects the real GDP to contract by 6.7 per cent in FY21, followed by a growth of 13.5 per cent in FY22.

For the week to February 14, mobility indicators continue to pick up, it said.

While power demand fell by 0.1 per cent week-on-week, this may be likely due to a payback from the stellar 9.6 per cent rise during the preceding week, it said, adding that labour participation rate inched down to 40.5 per cent from 40.9 per cent in the previous week. The brokerage said its proprietary index has been on an uptrend since hitting its trough during the strict lockdown in April last year.

“This supports our view that sequential momentum remains positive and that year-on-year GDP growth likely moved into positive territory, at 1.5 per cent in Q4 2020 (from -7.5 per cent in Q3) and 2.1 per cent in Q1 2021,” it said.

The continued recovery in the index is strongly predicated on containment of the pandemic, the brokerage said, adding it is upbeat on growth prospects due to the confluence of fiscal activism, the lagged effects of easy financial conditions, base effects and faster global growth.

India’s GDP to bounce back to 10.4% growth in FY22, says India Ratings

Source: Business Standard, Feb 10, 2021

New Delhi: India Ratings and Research (Ind-Ra) estimates India’s gross domestic product (GDP) to bounce back to 10.4 per cent growth in FY22 driven by base effect, signalling that a meaningful recovery will not happen before FY23.

The rating agency expects GDP growth to turn positive at 0.3 per cent in the January-March quarter of FY21 after shrinking in first nine months of the year.

The YoY recovery in FY22 will be V-shaped, but the size of GDP will barely surpass the level attained in FY20 and will be 10.6 per cent lower than the trend value, the agency said.

“FY22 will be covering the lost ground of FY21,” said Sunil Kumar Sinha, principal economist at Ind-Ra.

“FY20 was a year of slowdown and FY21 was a year of lockdown for India. The worst is behind us with respect to Covid-19. However, till mass vaccination and herd immunity becomes reality, lingering impact on the economy would continue,” Sinha said.

The impact of the lockdown on the economy, although subsiding, will continue to delay the normalisation of economic activities in the contact-intensive sectors, the agency said in its note.

Ind-Ra expects the government’s final consumption expenditure to grow 10.1 per cent YoY in FY22 as the Union Budget has set aside fiscal conservatism to provide the much-needed support to the demand side of the economy. The private final consumption expenditure is expected to grow 11.2 per cent in FY22.

Moody’s projects nominal growth of 17% for next fiscal

Source: The Economic Times, Feb 04, 2021

NEW DELHI: Global ratings agency Moody’s projected India’s nominal growth at 17% for the coming fiscal, a mark up from the 14.3% earlier, based on the “pro-growth” budget, but highlighted the weak prospects of fiscal consolidation.

“The budget’s focus on higher capital expenditure, financial sector reforms and asset sales will help to stimulate growth and supply broad-based credit support,” it said in a report on Wednesday.

The larger-than-expected deficit projections reflected both credible budgetary assumptions and greater transparency, but the government’s weak fiscal position is likely to remain a key credit challenge, Moody’s said. Read the rest of this entry »

Economic Survey pegs 2021-22 GDP growth at 11%

Source: ETRetail.com, Jan 29, 2021

NEW DELHI: Finance minister Nirmala Sitharaman on Friday presented the Economic Survey that details the state of the economy ahead of the government’s Budget for fiscal year beginning April 1, 2021.

The Economic Survey 2020-21, authored by a team led by chief economic adviser (CEA) Krishnamurthy Venkata Subramanian, details the state of different sectors of the economy as well as reforms that should be undertaken to accelerate growth.

The economy, which was battered by the coronavirus lockdown, is expected to see a strong recovery in the 2021-22 fiscal year.

The gross domestic product (GDP) contracted by a record 23.9 per cent in April-June and by 7.5 per cent in the second quarter.

For the full fiscal, the survey projected a contraction of 7.7 per cent and V-shaped recovery in the next fiscal.

GDP growth is seen expanding by 11 per cent in the 2021-22 fiscal (April 2021 to March 2022).

Meanwhile, agriculture sector remained the silver lining amid Covid crisis, the survey noted.

India’s GDP to contract 8% this fiscal: FICCI Economic Outlook Survey

Source: The Economic Times, Jan 26, 2021

New Delhi: India’s gross domestic product (GDP) is expected to contract by 8 per cent in 2020-21, according to the latest round of FICCI’s Economic Outlook Survey. The annual median growth forecast by the industry body is based on responses from leading economists representing industry, banking and financial services sector. The survey was conducted in January.

The median growth forecast for agriculture and allied activities has been pegged at 3.5 per cent for 2020-21.

“Agriculture sector has exhibited significant resilience in the face of the pandemic. Higher rabi acreage, good monsoons, higher reservoir levels and strong growth in tractor sales indicate continued buoyancy in the sector,” Ficci stated on the survey findings.

However, industry and services sector, which were most severely hit due to the pandemic induced economic fallout, are expected to contract by 10 per cent and 9.2 per cent respectively during 2020-21.

The industrial recovery is gaining traction, but the growth is still not broad based. The consumption activity did spur during the festive season as a result of pent-up demand built during the lockdown but sustaining it is important going ahead, the survey said.

Besides, it observed that some of the contact intensive service sectors like tourism, hospitality, entertainment, education, and health sector are yet to see normalcy.
“The quarterly median forecasts indicate GDP growth to contract by 1.3 per cent in the third quarter of 2020-21. The growth is expected to be in the positive terrain by the fourth quarter with a projection of 0.5 per cent growth,” estimates the survey.

Further, on the estimates of other macro parameters, the survey participants put the median growth forecast for IIP at (-) 10.7 per cent for the year 2020-21, with a minimum and maximum range of (-) 12.5 per cent and (-) 9.5 per cent respectively.

WPI-based inflation rate is projected to be flat in 2020-21. On the other hand, CPI-based inflation has a median forecast of 6.5 per cent for 2020-21, with a minimum and maximum range of 5.8 per cent and 6.6 per cent respectively, the survey revealed.

On the fiscal front, a slippage is imminent this year and the median estimate for fiscal deficit to GDP ratio was put at 7.4 per cent for 2020-21 by the participants with a minimum and maximum range of 7 per cent and 8.5 per cent respectively. Fiscal deficit for 2020-21 was budgeted at 3.5 per cent.

However, participants of the survey expect the economy to perform much better and have projected a median GDP growth rate of 9.6 per cent for the financial year 2021-22.

The strong rebound in growth will be supported by a favourable base as economic activity normalizes post the sharp pandemic led contraction. The minimum and maximum growth was forecast at 7.5 per cent and 12.5 per cent respectively.

“However, a surge in the number of COVID-19 cases and the appearance of new strains can be a deterrent to the improving growth conditions. It is therefore important that preventive measures continue to be in place,” Ficci said.

A good vaccine coverage without many cases of adverse reporting will be a pre-requisite for the normalization process, it added.

However, economists participating in the survey were deeply concerned about the global liquidity situation which, at present, is significantly in surplus and is finding ways to enter asset markets.

The participants called upon global central banks to remain watchful of the situation and not allow overheating of markets.

Moreover, despite optimism on the growth front, economists cited persistent risks to unemployment and therefore felt the need for continuous monitoring on that front.

Sharing their expectations from the Union Budget, a majority of the participating economists suggested increased public expenditure on building infrastructure.

They suggested that the government restructure its expenditure in favour of capital spending (in roads, railways, urban and rural infrastructure, housing) along with providing a clear roadmap and financing plans of the National Infrastructure Pipeline announced in the latter part of 2019.

To enhance revenue collections, economists suggested that government utilizes the current buoyancy in market sentiments to their favour by pushing for disinvestments.

They also underlined the need for continuous focus towards ease of doing business while simultaneously reducing the cost of doing business in India.

They also suggested a relief package for the services industry particularly those which were most impacted/continue to be deeply impacted by the pandemic including travel & tourism, hospitality, transport, education and healthcare sectors.

Economists participating in the survey have called for increased budget allocation for critical social sectors such as health and education given the current situation.

They said the spending on creation of agriculture infrastructure must be expedited which would result in enhanced capacity of cold storage and warehousing facilities in the country.

“Employment creation and consumption revival remain the key areas for ensuring a sustainable turnaround in economic prospects. Therefore, they called upon the government to announce temporary fiscal stimulus to support consumption in the form of income tax breaks or direct income transfers,” the economists in the survey said.

To ease the employment situation in both rural as well as urban areas, they called for greater budget allocations to MGNREGA along with introduction of an urban employment guarantee scheme similar to its rural equivalent.

Economic activity continues on normalisation, FY21 GDP to contract 6.7%

Source: Business Standard, Jan 13, 2021

Mumbai: Economic activity continued with its pace of normalisation and the festivities helped narrow the deficits as compared to the year-ago period in December, a Japanese brokerage said on Wednesday.

Based on data shown by its proprietary models, Nomura also revised up wits FY21 GDP forecast to a contraction of 6.7 per cent, as against the official estimate of a 7.7 per cent contraction in the pandemic-impacted fiscal year.

The Nomura India Monthly Activity Indicatorrose to-2.3 per cent in December provisionally when compared to the year-ago period’s performance, and was much better than the -7.7 per cent year-on-year witnessed in November and -13.3 per cent in September, it said.

The brokerage said this suggests a strong recovery in Q4. The pandemic situation did not substantially deteriorate in the festive season in December quarter, clearing the decks for a faster pace of economic normalisation, it said.

“We expect GDP growth of-6.7 per cent y-o-y in FY21, before rising to 13.5 per cent in FY22, above consensus (10 per cent). Along with the moderation in inflation in the short term due to lower food prices, we believe the economy is entering a Goldilocks period,” it said.

It can be noted that earlier in the day, analysts at its American peer Bofa Securities also pegged the GDP to close FY21 with a contraction of 6.7 per cent.

The Japanese brokerage said an index which it uses as a proxy for the extent of normalisation across the economy suggests economic activity continued to improve during December.

At the end of the festive season, the overall normalisation index for consumption improved to 88.3 per cent in December as against 87 per cent in November and 85 per cent in October, it said.

For passenger cars, two-wheelers and tractors, the normalisation index readings are higher than their respective pre-pandemic levels while on the investment front, the index is trending at 93 per cent, which is 3 percentage points below pre-pandemic levels, it said. Similarly, indicators on external sector and aggregate supply also showed improvements, it said.

Agri among few sectors to grow in FY21 in arid economy

Source: Business Standard, Jan 08, 2021

Pune: The pandemic will pull down India’s gross domestic product by 7.7 per cent in 2020-21, the first advance estimate of GDP released by the National Statistical Office (NSO) on Thursday showed.

This will be the biggest annual contraction in records going back to 1952, according to Bloomberg.

The estimate by the NSO was close to the Reserve Bank of India’s estimate of 7.5 per cent contraction. Economy trackers had estimated annual real GDP growth to be in the range of negative 6.5 to negative 9.9 per cent.

Nominal GDP will contract by 4.2 per cent, the release showed. As tax revenue grows in consonance with nominal GDP, revenue stress could be of a magnitude that is closer to this number. Advance estimates are important as the Union Budget uses these numbers for assuming GDP growth rates at current prices for the next financial year, on the basis of which all crucial numbers such as the fiscal deficit and tax numbers will be calculated.

“The movement of high-frequency indicators in recent months points towards a broad-based resurgence in economic activity. A more manageable pandemic situation compared to advanced nations has further given momentum to the economic recovery,” the finance ministry said in a release.

Investments would decline by 14.5 per cent, while private consumer spending would fall by 9.5 per cent, the official data noted. Countering this, government spending would grow, but at a tepid 5.8 per cent in 2020-21.

As expenditure by the Centre and the states did not grow in the first half of FY21 (over the previous year), the advance estimate data suggests that governments will ramp up spending in the second half. Some amount of evidence is visible in November, when the Centre spent 48 per cent more than a year ago.

A robust capex focus by both the Centre and the states in the remaining months of FY21 could further boost recovery.

Former chief statistician of India Pronab Sen said the severe dent in investment and slow growth in government spending were principally on account of state governments.

“State governments are clawing back on investments and seem to be ramping up their consumption expenditure towards the later part of the financial year,” he told Business Standard.

Manufacturing will contract by 9.4 per cent, and services by 8.3 per cent, the data showed. But among services, contact-less sectors — financial services and real estate — are expected to shrink only by 0.8 per cent, showing a much stronger recovery than expected.

Contact-sensitive sectors such as trade, hospitality, transport, and communication services, on the other hand, are set to fall by a massive 21.4 per cent in FY21, according to the data.

Gross value added in agriculture is set to grow 3.4 per cent, but that in another employment-generating sector, construction, is expected to fall by 12.6 per cent this year.

The estimates also show good recovery in some sectors in the second half of the financial year. For instance, the construction sector, which contracted by 30 per cent in H1, is expected to grow by 4.4 per cent in H2.

While manufacturing may show a slight uptick in H2 (+0.5 per cent), services may not grow at all (-0.8 per cent), according to Business Standard calculations.

But these growth figures are on a lower base of 2019-20.

Experts noted the uptick in the second half of FY21, but also underlined the limitations in the data.

The quality of advance estimates is questionable to some extent, because good data is available for only two quarters.

“The situation is different this year because though companies have shown strong profits, their wage bills, which go into the calculation of gross value added, have shrunk,” said Sen. This has not been reflected in the advance estimates.

“While the advance estimates have been based on the data that is available for only the first six to eight months, the modifications made in the extrapolation process seem to have captured the impending upturn expected in the remainder of this extremely tumultuous year,” Aditi Nayar, principal economist at ICRA, said in a note.

Including informal sector activity in the revised estimate, which will come in a year from now, may pull down the GDP number further.

“In the second quarter, while companies picked up well, the informal sector did not. And this will only get reflected next year,” Sen added.

Indian economy expected to contract by 9.6% in 2020-21: World Bank

Source: Business Standard, Jan 06, 2021

Washington: India’s economy is estimated to contract by 9.6 per cent in the fiscal year 2020-21, reflecting a sharp drop in household spending and private investment, and the growth is expected to recover to 5.4 per cent in 2021, the World Bank said on Tuesday.

In its Global Economic Prospects report, the World Bank said that the informal sector, which accounts for four-fifths of employment, has been subject to severe income losses during the Covid-19 pandemic.

“In India, the pandemic hit the economy at a time when growth was already decelerating.

The output is estimated to contract by 9.6 per cent in Fiscal Year 2020/21, reflecting a sharp drop in household spending and private investment, it said.

“In India, growth is expected to recover to 5.4 per cent in 2021, as the rebound from a low base is offset by muted private investment growth given financial sector weaknesses, the bank said.

The informal sector, which accounts for four-fifths of employment, has also been subject to severe income losses during the pandemic. Recent high-frequency data indicate that the services and manufacturing recovery are gaining momentum, the report said.

“In the financial sector, non-performing loans were already high before the pandemic,” it said.

In Pakistan, the recovery is expected to be subdued, with growth at 0.5 per cent in fiscal 2020/21. Growth is projected to be held back by continued fiscal consolidation pressures and service sector weakness, it said.

In the rest of South Asia, the economic impact of COVID-19 has been somewhat less severe but still significant. Economies that depend heavily on tourism and travel have been especially hard hit. That includes the Maldives, Nepal, and Sri Lanka, the report said.

“Regional economic activity is estimated to have contracted by 6.7 per cent in 2020, led by a deep recession in India, where the economy was already weakened before the pandemic by stress in non-bank financial corporations,” the World Bank said.

In Bangladesh, which had been one of the fastest-growing emerging markets and developing economies prior to the pandemic, growth is estimated to have decelerated to two per cent in FY2019/20.

In Pakistan, growth is estimated to have contracted by 1.5 per cent in FY2019/20, reflecting the effects of localised COVID-19 containment measures as well as the impact of monetary and fiscal tightening prior to the outbreak, the bank said.

South Asia is projected to grow by 3.3 per cent in 2021.

“Weak growth prospects reflect a protracted recovery in incomes and employment, especially in the services sector, limited credit provisioning constrained by financial sector vulnerabilities, and muted fiscal policy support,” it said. The forecast assumes that a vaccine will be distributed on a large scale in the region starting the second half of 2021 and that there is no widespread resurgence in infections, it added.

Fitch now expects lower GDP contraction in India at 9.4% for FY21

Source: Business Standard, Dec 08, 2020

New Delhi: A sharper-than-expected rebound by India’s economy in the second quarter has prompted Fitch Ratings to lower its projections for GDP contraction to 9.4 per cent in the current financial year from 10.5 per cent forecast earlier.

However, the agency warned against weak investment demand with Covid-19 affecting the economy and asset quality in the financial sector deteriorating and holding back credit growth.

Even as India pre-ordered 1.6 billion vaccine doses, it does not seem that the majority of people would get them even in 12 months, Fitch apprehended. It also said regional lockdowns are likely for few more months as virus is still spreading.

In its Global Economic Outlook, Fitch said, “We now expect GDP to contract 9.4 per cent in FY21 followed by an 11 per cent growth and 6.3 per cent growth in the following years,” the rating agency said.

The projections for FY21 compare to a GDP growth of 4.2 per cent in 2019-20 and 6.7 per cent annual expansion between 2015 and 2019.

While the projections for FY22 remained unchanged, those for the next year was raised by 0.3 percentage points.

It said the coronavirus recession has inflicted severe economic scarring and the country needs to repair balance sheets and increase caution about long-term planning.

“The need to repair balance sheets, increased caution about long-term planning, and firm closures will limit investment demand. Furthermore, increased financial-sector weakness – amid deteriorating asset quality – will hold back credit provision,” the rating agency said.

The failure of another bank (Lakshmi Vilas Bank) in recent weeks – the third failure in the past 16 months – underlines the challenges in the financial sector.

In September, Fitch had sharply lowered its forecast for India’s gross domestic product (GDP) to a contraction of 10.5 per cent in current fiscal 2020-21 (FY21) versus its previous estimate of 5 per cent contraction.

On Tuesday, Fitch said the Indian economy staged a sharper rebound in the July-September quarter from the coronavirus-induced recession. GDP fell 7.5 per cent year-on-year, up from -23.9 per cent in the April-June quarter.

“The rebound in activity was especially sharp in the manufacturing sector: output reached its pre-pandemic level in 3Q20 (July-September), and the manufacturing PMI hints at further gains,” it said adding that manufacturing is buoyed by strong demand for autos and pharmaceutical products, in particular.

The rebound in the services sector was more muted amid continued social distancing, with containment measures scaled back only gradually.

“The outlook is brighter owing to an expected rollout of various vaccines in 2021. India has pre-ordered 1.6 billion doses including 500 million doses of the Oxford/AstraZeneca vaccine.

Distribution should allow a faster-than-expected easing of social-distancing restrictions and boost sentiment,” it said.

However, it seems likely that the vaccine rollout over the next 12 months will not reach the majority of the people given the huge logistical and distribution challenges in a heavily populated country like India, Fitch said.

Regional shutdowns are likely in the next few months while the virus is still spreading.

Consumer prices have continued to accelerate in recent months, buoyed by lingering supply disruptions.

This, Fitch said, has deterred the Reserve Bank of India (RBI) from resuming its easing cycle.

“We think inflation has now peaked and should start to decelerate rapidly on favourable base effects and an easing of supply disruptions. This should provide room for the RBI to cut interest rates in 2021,” it said.

Fitch saw consumer price inflation at 4.9 per cent in the current fiscal, which would ease to 3.5 per cent in the next.

For the global economy, it projected a less severe decline in GDP at -3.7 per cent in 2020 compared to -4.4 per cent in the September projection.

It also revised up its annual world GDP growth forecast for 2021, but only modestly, to 5.3 per cent (from 5.2 per cent), as the deteriorating outlook in the very near term partially offsets a stronger outlook from the sector half of the year. “We are now significantly more optimistic for 2022, as we assume vaccine rollout will facilitate a material easing in social distancing,” it said.