GDP contracts 7.3% in FY21, India’s PMI hits 10-month low, and RBI on Cryptocurrency: Three things Teji Mandi investors should know on June 1, 2021

Teji MandiUpdated: Tuesday, June 01, 2021, 10:25 PM IST
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GDP contracts 7.3% in FY21, India’s PMI hits 10-month low, and RBI on Cryptocurrency: Three things Teji Mandi investors should know on June 1, 2021 |

GDP Declines Amidst Second COVID-19 Wave

Indians have cut their retail and shopping expenses, as most of their incomes fell and jobs were lost. This has resulted in a sour sentiment for Gross Domestic Product (GDP). According to the National Statistical Office (NSO), India’s GDP contracted 7.3% in FY21 - and that’s the biggest dip the country has seen since its independence in 1947.

Provisional estimates of GDP show that the per capita income measured in current prices had declined 4% as compared to last year. Consumer spending fell more sharply by 7%. At current prices, the national income has decreased by 3%.

India’s GDP contraction highlights that the economy has been steadily worsening even more due to the COVID-19 lockdown. Lower GDP means that the average income of the people has overall gone down and it also signals a squeeze on job opportunities.

India's PMI Hits a 10-Month Low

After the GDP data, India’s manufacturing PMI is also seen hitting a major speed bump. According to IHS Markit, India’s Manufacturing Index (PMI) has dropped to a 10-month low of 50.8 in May, down from 55.5 in April.

Many firms scaled up their operations in May but the pace of expansion again is the weakest in the past 10-months. With new guidelines announced by states on reopening of the manufacturing sector, it’s expected that it would improve sales and consumption in the future.

The PMI index highlights the current direction of economic trends in the manufacturing sector. Lower PMI highlights stagnated momentum in the manufacturing activity. New demands, orders, and export contracts increasing marginally from May brings in hopes, but it will still take some time to boost production and sales.

RBI Clears Air on Cryptocurrency Trading

With the recent digital currency mania, the Reserve Bank of India (RBI) has emphasized that banks and other businesses cannot cite the Supreme Court of India's order on virtual currencies, which was set aside in 2020.

Earlier, there were a few banks who informed their customers to stay cautious of cryptocurrency trading. Looking at this, the RBI clarified that the 2018 circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from.

The clarification from the regulator means that banks are not barred from dealing with various cryptocurrencies. This has renewed the hopes of investors who are interested in trading with cryptocurrency. However, the RBI has not yet taken any stance on the validity and legality of cryptocurrency transactions in India.

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