InvestorQ : What in your view are the positive takeaways from the Sep-20 quarter GDP numbers announced last week?
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What in your view are the positive takeaways from the Sep-20 quarter GDP numbers announced last week?

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Arti Chavan answered.
10 months ago
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For the Sep-20 quarter, the GDP number came in negative at -7.5%. However, that actually enthused the markets as the contraction was much lower than anticipated by the street. Also, the GDP performance showed a genuine performance over June quarter.

The Q2 GDP contracted -7.5%, but it is actually a lot better sequentially and also better than what the street had anticipated; which is the biggest positive. After all, it is the context that matters. Yes, more important, don’t believe all those press stories on recession. Let me explain what I mean.

The financial news channels and newspapers are rife with stories of how India has already entered recession. If you go by traditional definition of GDP contraction for 2 quarters in succession, then that is technically a recession. However, it it hides a cheerful reality.

To begin with, contraction in GDP improved from -23.9% in Q1 to -7.5% in Q2. The momentum is in favour of economic recovery. Construction and manufacturing; the two important lead indicators, have shown a solid recovery which means the trickle-down effect of all the stimulus appears to be working.

The biggest positive is that manufacturing growth is sharply turning positive. It actually turned around from -39.3% to +0.6% and that is beyond even the most optimistic estimates. In short, the turnaround has been driven by a slew of sectors indicating a very sharp pick-up in capital demand and also consumer demand.

Apart from manufacturing, power sector and agri sector has also seen good tidings. Power has led the recovery and this sector has actually led the growth at 3.5% in Q2. The Kharif success in 2020 kept agriculture solid at 3.4%. That is surely significant.

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