GDP growth slows to 3.1% in Q4 FY20 but is this the final estimate? Govt caveat leaves room for revision

Growth in the last quarter of FY 2020 has been the slowest since the global financial crisis more than a decade ago.

India’s economy in Q4 FY20 grew at a mere 3.1 per cent on-year, hurt by coronavirus pandemic and a nationwide lockdown that followed. While agriculture and mining sectors saw decent growth, manufacturing and construction activities contracted in the fourth quarter. Even as the GDP growth estimates surpassed most estimates made by various economists and rating agencies, the Ministry of Statistics and Programme Implementation has mentioned that the data flow from the economic entities has been impacted due to the pandemic and therefore the quarterly and annual estimates are likely to be revised.

Growth in the last quarter of FY 2020 has been the slowest since the global financial crisis more than a decade ago, said Rumki Majumdar, Economist, Deloitte India. Although the market analysts had expected a slower growth this quarter, the extent of the slowdown remains elusive, she added. 

The government has also revised down the GDP growth in Q1, Q2, and Q3 to 5.2 per cent, 4.4 per cent, and 4.1 per cent respectively. Altogether, the real GDP at constant prices in the year 2019-20 is now estimated to attain a level of Rs 145.66 lakh crore, as against the first revised estimate of FY19 GDP of Rs 139.81 lakh crore.

The 4Q GDP growth number at 3.1 per cent vs consensus of 2.2 per cent is much better while the full year FY20 GDP growth of 4.2 per cent, against the consensus of 4.4 per cent is a miss, said Arjun Mahajan, Head – Institutional Business, Reliance Securities. Farm sector growth of 5.9 per cent in the fourth quarter is a saviour, he added.

Meanwhile, the growth rate of eight core industries for April 2020 fell 38.1 per cent, compared to a fall of 9 per cent in March 2020. The output of electricity fell 22.8 per cent, while the output of cement fell 86 per cent; steel fell 84 per cent; fertiliser by 4.5; refinery by 24.2 per cent; crude oil by 6.4 per cent; and coal fell 15.5 per cent in April 2020. Also, India’s fiscal deficit skyrocketed to 4.6 per cent of GDP in the last fiscal against the target of 3.8 per cent of GDP. Full-year 2019-20 fiscal deficit stood at Rs 9.36 lakh crore, against a target of Rs 7.67 lakh crore.