Indian economy likely to show improvement in Q2 with GDP contraction of 9.9 per cent: Care Ratings

Care Ratings in its recent report has mentioned that the Indian economy is likely to come up with healthier numbers in Q2FY21 with GDP narrowing by 9.9 per cent vs 24 per cent in Q1FY21 during the onset of the pandemic.

It further mentioned that from a gross value-added point of view, de-growth will be 9.4 per cent in Q2FY21. It based its optimism on the development in agriculture, forestry, financial services, real estate, and professional services.

In the case of agriculture, the report mentioned that the main Kharif harvest started in late September and will carry on till December. Therefore, the good Kharif crop probability will show in the Q3FY21 numbers only. The expected positive impetus in Q2FY21 is based on two factors: the hope of a pick-up in demand in the festivals and an uptick in corporate profit, which nevertheless has been more due to the cost savings rather than the top-line growth.

Sales growth continued to be negative in Q2FY21 but largely, numbers are positive as cost economies have been more on salary bills, power and fuel, and selling expenses, combined with a drop in growth in raw material costs due to a fall in sales.

It expects manufacturing de-growth to improve to (-) 10 per cent from (-) 39.3 per cent in Q1FY21, and mining & construction at (-) 12 per cent from (-) 30 per cent in Q1. It said electricity, gas & water will also improve to (-) 1.5 per cent from (-) 7 per cent in Q1FY21, and added that trade and other services are also likely to improve to (-) 27 per cent from (-) 47 per cent in Q1FY21.