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Barnabas Gan, Economist at UOB Group, assessed the latest GDP figures for the April-June period in India.

Key Quotes

“India’s GDP plunged 23.9% y/y in the three months between April and June 2020 (1QFY20/21), worse than market expectations which pencilled a smaller-thanexpected decline of -18.8% y/y.”

“The contraction was led primarily by the fall in trade and industrial production. Note that India’s industrial production has declined by 35.9% y/y in 1QFY20/21, while exports reported by the Ministry of Commerce and Industry plummeted 36.5% y/y over the same period.”

“India’s economic prospect for the rest of the year will likely rest on two key factors, namely on the overall recovery of the global economic landscape on the back of improving COVID-19 situation and risk appetite, and India’s handling of the COVID19 pandemic within its shores.”

“Barring further exacerbation of the COVID-19 pandemic, we recognise that India’s GDP has likely seen its worst. Note that RBI’s latest press statement was relatively more upbeat compared to its May’s release, citing that economic activity has started to recover.”

“We downgrade our GDP outlook to contract 7.0% in FY20/21, down from our prior expectation for a +2.0%. India’s rate of COVID-19 infections remain exceedingly high at this juncture, and is slated to have the world’s second-highest number of COVID-19 cases should the rate of infections stay unchecked. Nevertheless, highfrequency data suggests some recovery from April-May’s low, highlighting that the rate of GDP contraction could taper into 2H20.”

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