IHS Markit expects recovery in India GDP in second half of 2020

IHS Markit has released a report, which states that the growth of India’s gross domestic product (GDP) is likely to recover in the second half of 2020.  IHS is of the view that if the impact of the COVID-19 pandemic recedes, India would project a GDP growth of 6.7 per cent in FY22E.

It highlighted the various disruptions that were caused as a result of the sudden outbreak of the virus as well as its impact on the industrial production and consumer spending in the country during April and May. Based on the facts, it said that the severe negative impact is expected to cause a significant contraction in GDP in the April-June quarter of 2020, resulting in a recession in FY21 with 6.3 per cent YoY fall in India’s GDP.

Despite the negative short-term shocks from the pandemic, it said that the total foreign direct investment (FDI) into India has remained buoyant. It noted that foreign direct investment by technology firms in the first seven months of 2020 has already reached around US$ 17 billion, boosted by the US$ 10 billion new investment announced by Google in mid-July. IHS Markit added that Facebook, Amazon, and Foxconn are among the other global technology firms that have committed large new investments into India this year.

According to IHS Markit, an important positive factor for India is its large and fast-growing middle class, which is helping to drive consumer spending. It said that the total Indian consumer spending is forecast to grow by 42 per cent between 2020 and 2025, measured in USD terms at constant prices.

It further estimated that India’s consumption expenditure would double to US$ 3.2 trillion in 2030 from US$ 1.6 trillion in 2020, measured in constant prices. This is expected to be led by robust growth in GDP and increasing per capita income for the country's fast-growing middle-class urban households.