Since the third quarter of FY 2018 (which is the same period when demonetisation took place), the quarterly GDP growth has been declining except in the fourth quarter of FY 2019. However, the trend continued and in the third quarter of FY 20, the GDP growth stood at 4.7 per cent, showed Care Ratings’ latest report.
According to Care Ratings’ report, India’s GDP grew by 4.7 per cent in the third quarter in FY 20, 0.9 per cent lower than the corresponding quarter a year ago. “The economic growth during the quarter has seen to be constrained on account of subdued consumption and investment activity. While most of the sectors were under pressure, the only driving factor has been the government expenditure,” added the report.
As measured by GFCF (as a % of GDP), the investment activity has declined to 26.1 per cent in the third quarter of FY 20. While there is a rise in the investment activity in the first quarter of 2019-2020, later there was a drop in investment in the second and third quarter.
Industrial output (as measured by IIP) for the month of February 2020 was at a 7-month high. During the month, IIP grew by 4.5 per cent compared with the 0.2 per cent growth in February 2019. The rating agency pointed out in March 2020, the production in the eight core industries contracted at the fastest pace in the past eight years. “Eight core sector output contracted considerably about 6.5 per cent after registering persistent growth in the past four months. In March 2019, the production in these industries had grown by 5.8 per cent whereas it had expanded by 7.1 per cent a month ago.”
In April 2020, the manufacturing PMI reached a 15-year low — a decline from 51.8 in March 2020 to 27.4 in April 2020. The agency reasoned the decline to nationwide lockdown which lasted throughout April 2020.
In March 2020, the GST collection was 8 per cent lower than a year ago. It stood at Rs 97,597 crore in March 2020, whereas in the same period last year it stood at Rs 1.07 lakh crore. In FY20, total GST collection aggregated Rs 12.22 lakh crore, 4 per cent higher than Rs 11.77 lakh crore in the corresponding period a year ago.
The increasing number of Coronavirus cases around the world has raised global recessionary concerns and that is expected to have an impact on India’s GDP growth. In the case of the national lockdown, India’s GDP growth in the fourth quarter of FY 20 and FY 21 is likely to be notably lower. While the rating agency predicts lower growth, it does not give a figure.