New Delhi: With contraction in GDP by 7.5 per cent in July to September quarter (Q2 FY21) which is a rebound from the earlier quarter when the economy had contracted by 23.9 per cent, India Inc and analysts said the figures reflect that the Indian economy is on a sharp recovery mode and all levers should be used to sustain this improvement.
"The GDP figure showing a decline of 7.5 per cent in the second quarter has come in as a pleasant surprise. This is much better than what was anticipated by most analysts and clearly reflects that the Indian economy is on a sharp recovery mode. The positive, albeit marginal, growth noted in the manufacturing sector in the second quarter is truly encouraging," Dr Sangita Reddy, President, FICCI, said.
"The policy guidance provided by the government so far has been encouraging and we hope to see continued momentum on that front. We are at a critical point on the growth trajectory and it is important that all levers are used to sustain this improvement," added Dr Reddy.
"GDP at Constant (2011-12) Prices in Q2 of 2020-21 is estimated at Rs 33.14 lakh crore, as against Rs 35.84 lakh crore in Q2 of 2019-20, showing a contraction of 7.5 per cent as compared to 4.4 per cent growth in Q2 2019-20," said the Ministry of Statistics and Programme Implementation in a statement.
"Quarterly GVA at Basic Prices at Constant (2011-12) Prices for Q2 of 2020-21 is estimated at Rs 30.49 lakh crore, as against Rs 32.78 lakh crore in Q2 of 2019-20, showing a contraction of 7 per cent," it added.
ASSOCHAM Secretary General Deepak Sood said the latest GDP figures show sharper recovery in India's economy which is braving the COVID-19 pandemic. "A decisive arrest of the slide from a steep contraction of 23.9 per cent in the first quarter of 2020-21 to 7.5 per cent drop in Q2, clearly shows a sharper recovery in India's economy which is braving the Covid-19 pandemic with strong resilience. Going forward, the second half of the current financial year should give us surprises on the positive side," Deepak Sood said. He said several key high-frequency indicators point towards further improvement, with the rural economy leading the rebound even as the urban consumption is returning to shape.
B Gopkumar, MD and CEO of Axis Securities, said the country's July-September GDP confirms faster normalisation of the activities in Q2, with a stronger than expected pickup.
"Economic contraction continued in the September quarter but less severe than the June quarter, a fall of 7.5 per cent is better than the expectation from the street. The global economy also witnessed a stronger than expected rebound of economic activities in the September quarter. Based on that, the IMF has already revised its assessment for global growth for 2020 to be a less severe contraction than predicted in June 2020," B Gopkumar said.
Sreejith Balasubramanian, Economist - Fund Management, IDFC AMC, said the economic data ahead would be crucial to gauge the quantum of 'froth' in this Q2 data.
"India's Q2 FY21 real GDP contraction of 7.5 per cent y/y was in line with our forecast and the recent improvement in economic data. However, economic data ahead would be crucial to gauge the quantum of 'froth' in this Q2 data from pent up, festive and inventory restocking demands and to also throw more light on the employment and wage situation," Balasubramanian said. He also mentioned that it would be important to see the recovery leg eventually and thus the hit to medium-term potential growth.
Dr Joseph Thomas, Head of Research - Emkay Wealth Management, said the pandemic and lockdown-induced economic contraction seems to be gradually slowing down with the Q2 GDP contraction at 7.5 per cent.
"This looks relatively better compared to a contraction of 8 per cent to 9 per cent which was widely expected. Manufacturing is positive at 0.60 per cent as against an expected contraction of 9 per cent. This has helped the aggregate number to be better than expected. While agriculture is positive at 3.4 per cent, construction and mining remain in negative territory," Joseph Thomas said.