Q4FY20 GDP estimates out today: What's in store for India's economy

Economists and analysts indicated that the GDP figures released today will only offer an assessment of the early damage caused by Covid-19 outbreak. They also expect a sharp economic decline in upcoming quarters.

HIGHLIGHTS

• Official GDP number for Q4FY2020 will be released today
• Economists expect a sharp decline in GDP growth
• The impact of the lockdown may not be reflected fully in the March quarterly results

Official GDP estimates for the last (January-March) quarter of 2019-20 will be out later in the day, offering a glimpse of the economic devastation that will unfold in the June quarter.

Economists and analysts indicated that the GDP figures released today will only offer an assessment of the early damage caused by Covid-19 outbreak. They also expect a severe recession in the first half of the year as growth will turn sharply negative in the upcoming quarter.

It may be noted that the impact of the lockdown may not be reflected fully in the March quarterly results as it was announced by Prime Minister Narendra Modi on March 25.

But the seven days of lost business in March can offer a larger picture of what India can expect as the quarters keep getting even more brutal. That apart, the impact of the closure of travel, tourism and hospitality are also expected to take a toll on the March GDP numbers.

Here are some key points you should know ahead of the official March quarter GDP estimates:

Glimpse into future devastation

The estimates for the quarter ended March will only offer a glimpse into the devastation caused by the coronavirus pandemic and subsequent lockdown. The data for March will take into consideration one week of lockdown, and experts say that it is enough to drag that estimate for the entire quarter.

Economists polled by Reuters expect the full impact of lockdown on manufacturing and services will become clear in the June quarter, with Goldman Sachs predicting a 45 per cent contraction.

Many experts have already said that the fiscal year beginning April will see the worst economic contraction in four decades.

Commenting on the same, IFA Global Research Academy said in its daily outlook that the Q4FY20 GDP will "not entirely" capture the effect of the lockdown as the economy was open for up to three weeks in March before the lockdown was announced.

"It was only in the last week of March that the economy was completely shut down. However, the economy was weak going into coronavirus pandemic itself and the print would likely reflect that. Q3 GDP print was already at a seven-year low at 4.7 per cent," the research note added.

"Q4 print could come in at around 2.1 per cent and that would imply GDP Growth for FY20 to be around 4.4 per cent. In terms of the impact the print can have, the market has already set a low bar as far expectations are concerned. Much of the negativity is priced in," it added.

"Markets are braced for a shocker of a print for Q1 FY21 as well."

The research note added that much would depend on the evolution of high-frequency indicators as it will a "sense of revival" in aggregate demand in the economy and help in projecting growth for the second half of the current fiscal.

What experts, agencies predict

Wide-ranging estimates have been provided by ratings agencies and economists. While ICRA has estimated the Q42020 GDP at 1.9 per cent, Crisil has pegged it at 0.5 per cent. SBI, meanwhile, has estimated growth in the quarter ended March at 1.2 per cent.

A poll of economists conducted by Reuters offers a more optimistic estimate at 2.1 per cent. Care Ratings has gone even further ahead to peg Q4 GDP at 3.6 per cent.

The ‘zero’ factor & recession

Analysts will be keenly watching the GDP estimates for the quarter to track how fast India will officially slip into a recession. If it moves closer to zero in the March quarter, then a full-blown recession may hit India sooner. A recession occurs when there is a contraction or decline in GDP for two consecutive quarters.