Views on Q1FY21 GDP Numbers - Mr. Deepak Jasani, Head of Retail Research, HDFC Securities

The June quarter GDP number came in worse than most estimates at -23.9% YoY. Widespread and repeated lockdowns has resulted in this sharp fall. Construction contracting 50.3% and Trade, hotel, transport, communication contracting 47% are the two negative surprises. Investments too contracted 47.1%. The numbers being slightly worse than expected could impact the market sentiments mildly. The RBI also cannot do much beyond what it has already done. Ball would now be in the court of the Govt to spur consumption by taking fiscal measures, where RBI may come in to help for smoothening the fund raise program.

The GDP numbers could upset the government's fiscal math that may force major changes in the public finance estimates.

Now the focus will shift to Sept quarter. Going by the July Core Infra number of -9.6%, the Sept quarter may also record high single digit decline in GDP on a YoY basis. While the rural economy has offset the slowdown in urban areas in Q1 to some extent, rural recovery is unlikely to support such pace in subsequent quarters. One reason for this is that Covid-19 has started to penetrate rural areas at a fast pace since July.

India's recovery path appears a long and hard one. A mix of monetary and fiscal measures to prop up the economy has fallen short so far. Some innovative thinking on the part of Govt/RBI and some good providence are required to turn the tide quickly.

Source : Equity Bulls

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