Positive GDP growth in Quarter 3 reflection of strengthening V-shaped recovery

The real Gross Domestic Product (GDP) growth of 0.4 per cent in October-December quarter is a reflection of further strengthening of the V-shaped recovery that began in July-September quarter of 2020-21. As per government data, India's GDP grew 0.4 percent during the third quarter ended December 31, 2020. It expects GDP to contract by 8 percent in the financial year 2020-21.

Real GDP growth of 0.4 percent in Q3 of 2020-21 has returned the economy to the pre-pandemic times of positive growth rates. It is also a reflection of a further strengthening of V-shaped recovery that began in Q2 of 2020-21, after a large GDP contraction in Q1 followed one of the most stringent lockdowns imposed by the government relative to other countries.

The government also revised the GDP contraction in the first quarter to 24.4 percent from 23.9 percent earlier, while the contraction for the second quarter was revised to 7.3 percent as opposed to 7.5 percent estimated earlier.

The sharp V- shaped recovery has been driven by rebounds in both Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) as a combination of astute handling of the lockdown and a calibrated fiscal stimulus has allowed strong economic fundamentals to trigger quick resumption of high activity levels in the economy.

The overall uptick in the economy and resurgence in GFCF was also triggered by the Centre's capital expenditure (capex) that grew 129 per cent year-on-year in October, 249 percent in November and 62 percent in December 2020.

Source: Business Today