Economy likely returned to growth in Q3: Poll
The country’s economy is likely to have returned to growth in the December quarter on account of the easing of restrictions on movement after the first wave of the coronavirus epidemic peaked, a Reuters poll predicted.
The median forecast from a survey of 58 economists, conducted between February 18 and 24, put year-on-year growth at 0.5 per cent in the December quarter, as the economy stabilised after contracting 23.9 per cent and 7.5 per cent in April-june and July-sept quarters respectively.
“We forecast a mild expansion in the December quarter owing to strong resumption in economic activity, festival led consumer spending and modest recovery in manufacturing,” said Rini Sen, economist at ANZ. “We believe services likely spearheaded growth.” The previous poll, taken a month ago, had predicted a 2.0 per centcontraction.
However, the wide range of forecasts in the latest poll — from a contraction of 4.7 per cent to a 2.6 per cent expansion — underscores the uncertainty. The country has reported the second highest number of coronavirus cases, lagging only behind the United States, but it is widely accepted that infections are far higher than officially recorded.
The economic recovery has been aided by the government’s spending plan and its commitment to not bring its fiscal deficit down to prepandemic levels for at least five years, and by the Reserve Bank of India’s pledge to keep monetary policy accommodative.
“Pent-up goods demand supported by elevated financial savings have led to a rise in manufacturing. Alongside this, a strong pick-up in government spending on social welfare schemes and capital expenditure has also helped,” noted economists at HSBC. The central bank slashed its key repo rate by 115 basis points last year and has since held it steady at 4 per cent.
“We expect liquidity normalisation to be calibrated and incremental during the course of the year. No change is expected in the repo rate this year,” said Radhika Rao, economist at DBS Bank in Singapore.