Q1 GDP plunges 23.9%; worst in 40 years!

Q1 GDP plunges 23.9%; worst in 40 years!

Last updated: 31 Aug, 2020 | 03:22 pm

Q1 GDP plunges 23.9%; worst in 40 years!
  • India’s GDP contracted 23.9% YoY in Q1FY21, as lockdowns imposed to control the spread of Coronavirus pandemic curtailed economic activity
  • ‘As expected, this is the worst GDP contraction witnessed in at least 40 years, and also the first GDP decline since India began publishing quarterly GDP numbers in 1996’.
  • The fall is mainly on account of a 47% on-year decline in Trade, hotel, transport, communication, as most of the industries in this sector remain shut in April and some part of May. Construction (-50%), Manufacturing (-40%), Mining & Quarrying (-23.3%) were the other sectors that saw major contraction. 
  • Agriculture was the only industry with positive on-year growth.

INDmoney Analysis

  • Analysts had earlier expected a fall of about 18% in Q1 GDP. The fall has been steeper than expected.
  • “India had imposed one of the strictest lockdowns in the world. This has led to severe economic consequences, as India's GDP slump for the Apr-Jun quarter is worse than the United Kindom (-20.4%) and United States (-9.5%)”.
  • Given the steep decline in the quarter, the yearly figure will also get impacted in this year. The picture for GDP growth remains bleak for FY21. The World Bank had projected 3.2% contraction for this year, while the International Monetary Fund pegged it at 4.5%. Nomura had estimated a decline of 5.2 per cent, and ICRA had recently revised its forecast for contraction in the current fiscal to 9.5%.
  • Invest in equities in a staggered manner. Keep your SIP’s running. Stick to large caps and index stocks that are best suited to navigate the economic crisis.
  • Stick to AAA-rated low duration funds and bonds over high duration funds, and long-maturity bonds as yields will remain volatile in the near future.