GDP expected to grow 0.7% in December quarter, got increase in private consumption and government spending support | GDP growth may remain 0.7% in December quarter, private consumption and increase in government spending

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  • GDP expected to grow 0.7% in December quarter, got increase in private consumption and government spending support

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  • The slowdown to overcome Kovid started last year will end
  • But the growth of the aviation sector remains below zero even in the third quarter

The country’s GDP growth is likely to be positive in the third quarter of the current financial year. Rating agency ICRA forecasts GDP growth to be 0.7% in the December quarter. This would end the slowdown that began with the lockdown to overcome Kovid last year. According to the rating agency, GDP growth was down to minus 7.5% in the second quarter.

Aviation sector growth remains below zero

GDP is expected to increase in the December quarter due to increase in domestic consumption and government spending. Estimates of positive growth in the third quarter suggest that the country has recovered from a two-quarter slump due to Kovid. But the growth of the aviation sector remains below zero in the third quarter as well.

Lead Indicators of Non-Agri Sector Giving Positive Signs

Aditi Nair, Principal Economist, ICRA, says, “Lead indicators of all non-agri sectors are showing positive growth in the third quarter. This has been attributed to the unlocking of the economy, increase in consumption during the festive season and increase in spending by the Center. GDP growth in the December quarter has been positive, but it has received lower base support for the third quarter of the previous financial year.

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Margins of some sectors decreased due to increase in raw material prices

According to ICRA, the industrial production rate increased by 1% in the December quarter. However, due to increase in the price of raw material, the margins of some sectors have decreased. Profit margins of most listed companies have increased. They have benefited from cost cutting measures during the peak of Kovid.

Formal economy has recovered from the crisis caused by Kovid

The rating agency said, “According to our estimates, the formal economy has recovered from the crisis of Kovid. His health is improving at the expense of the smaller and less formal sector. Due to this, the process of formalization of economy is accelerating. Improvement in the condition of the informal sector will come gradually. Due to not having many indicators, full details of their recovery are not available.

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