India's GDP growth to slow down to 1.5% in Q4, says ICICI Bank report

India's GDP growth is estimated to be 4.2 per cent for full fiscal FY20 and minus 4 per cent for FY21 "with more than Rs 14 lakh crore of real output loss", as per ICICI Bank's research report

India's GDP growth is expected to slow down to 1.5 per cent in the fourth quarter of the financial year 2019-20 with a "possible downside bias", falling sharply from the 4.7 per cent reported in Q3, on account of the spread of the coronavirus and subsequent lockdown, a research by private lender ICICI Bank said on Wednesday.

According to the ICICI Bank's research report, the GDP growth is likely to be 4.2 per cent for full fiscal FY20 and minus 4 per cent for FY21 "with more than Rs 14 lakh crore of real output loss".

"The sharp slowdown in growth over Q4 FY20 will weigh on headline GDP growth for the just-concluded fiscal year. We expect GDP growth to print at around 4.2 per cent YoY in FY20, which is far more subdued than the government's earlier estimate of 5 per cent YoY (given much prior to the lockdown)," according to ICICI Bank Global Markets report.

Growth in Gross Value Added (GVA), a measure of total output and income in the economy, is also likely to print at a low number in the last quarter of the previous fiscal, the report noted. The government is set to release estimate for gross domestic product (GDP) growth for March quarter (Q4 FY20) on Friday.

During January-March 2020, the domestic as well as global environment remained significantly challenged as the coronavirus outbreak impacted the improvement that was visible at the beginning of 2020. The slowdown from tepid economic activity in January-February was compounded by the coronavirus-led lockdown in March. The month of March saw a significant loss of output on account of the nationwide lockdown.

Also Read: Coronavirus effect: India's fourth, 'perhaps worst' recession is here, warns CRISIL

For April-June quarter (Q1 FY21), ICICI Bank projected a steep double-digit negative GDP growth estimate, citing extended nationwide lockdown which worsened the economic activity in the country.

"Going ahead, the lockdown over April, with an extension in May across several districts, and the sporadic resumption in activity in others, would imply a significant negative bias to the GDP growth estimate for April-June 2020, which is likely to be a steep double-digit negative print," the report said.

In FY21, industry is expected to contract sharply in wake of significant loss of output due to disruptions on both supply and demand sides, while manufacturing will remain a hostage to poor demand and disrupted supply, along with the additional stress of tepid export demand, the report said.

Also Read: India's GDP to contract 6.8% in FY21 due to coronavirus lockdown: SBI report

"Recovery across the world, whenever it happens, will restore some pent-up demand through export channels. Getting factories back to work will require effort, and previous business plans could get serious re-thinks. However, industrial production still remains a sole function of the country's ability to produce without a major health fallout," the report noted.

As per the report, easing up of movement restrictions and renewed domestic demand will spur services activity gradually. Till then, government spending will keep the sector afloat. The agriculture sector is expected to perform reasonably well assuming a normal monsoon.

Earlier on Tuesday, economist at State Bank of India (SBI) projected India's GDP to grow at 1.2 per cent in the fourth quarter of FY20 as economic activity came to a standstill in the last week of March due to the nationwide lockdown to contain spread of COVID-19. As per the SBI's research report - Ecowrap -- the GDP growth is likely to be 4.2 per cent for FY20 and minus 6.8 per cent for FY21.