ET Survey of economists estimates a median of 0.32% growth in Q3 of FY21

New Delhi:The Indian economy is likely to post modest growth in the December quarter, reversing the technical recession caused by Covid-19, following a strong recovery towards the end of calendar 2020. An ET survey of economists estimated a median of 0.32% growth in the third quarter of FY21, marking a bounceback from the previous two quarters of contraction in gross domestic product (GDP). The National Statistical Office will release official GDP estimates for the third quarter of FY21 at the end of the month.

India’s GDP contracted 23.9% in the June quarter following what was regarded as the strictest lockdown in the world that was imposed on March 25 to contain the coronavirus spread. In the September quarter, GDP shrank 7.5%. “In our view, the recession has ended in the last quarter,” said Aditi Nayar, principal economist at ICRA, pegging December quarter growth at 0.5-0.8%. The October-December period had seen a festive season demand boost, with automobile and consumer durables posting strong sales. Data released last week showed industrial production expanded 1% in December. Manufacturing grew 1.6% in the month.

“India will most likely see a positive growth return in Q3FY21, as the inventory trade cycle pushed up manufacturing, and services also saw a gradual return to normalcy,” said Rahul Bajoria, chief India economist at Barclays, putting growth at 0.4% for the quarter.

State Bank of India (SBI) Research recently raised its estimate for third-quarter performance to 0.3% growth with an upward bias.


Global brokerage Nomura took a more optimistic view, estimating India’s third quarter growth at 1.5%, according to Sonal Varma, its chief India economist.

These projections point to a faster recovery than anticipated earlier-–most economists had expected negative growth in the third quarter, followed by a small positive rise in GDP in the March quarter.

The statistics office has estimated a 7.7% contraction in FY21, which implies a small decline in the second half of the fiscal year after a 15.7% drop in the first half.

“The corporate results so far also reinstate the fact that Q3 growth would be much better than the Q2 growth. The corporate GVA (gross value added) of 1,129 companies has expanded by 14.7% in Q3 as compared to 8.6% growth in Q2 (of 3,758 companies ex-telecom),” said an SBI Research report.

While the agriculture sector remained strong, the third quarter also saw a substantial pick-up in government spending, according to Radhika Piplani, economist at Yes Bank, which estimates third-quarter growth at 0.3-0.4%.

“Early corporate earnings results show that the manufacturing sector will show a positive surprise. We are expecting a strong recovery from this sector,” Piplani said. HDFC Bank pegged GDP growth at 0.5% in the quarter.

The services sector was pulling growth down, according to DK Joshi, chief economist at Crisil, which sees the contraction continuing in the December quarter as well.

“Services sector hasn’t really picked up, especially the contact-based services, pulling down the overall growth,” Joshi said, pegging the decline at 1%. Madan Sabnavis, chief economist at CARE Ratings, estimates third-quarter GDP likely contracted 0.5-1.5%. India Ratings and Research expects GDP to have contracted 0.8% in the third quarter, while Brickwork Ratings’ chief economic advisor, M Govinda Rao, saw a steeper contraction of 3.2%.