It was certain that this year for the Indian Economy will be a tough one as has been for the entire world. With tough Lockdowns imposed all around the world, the World Economy has taken a hit and the Indian Economy is no different. All eyes were upon the Index for Industrial Production (IIP) which were to be released for June. The June month saw a contraction of 16.6% YOY basis, bringing an end to a quarter of 4 consecutive monthly contractions. The April to June Quarter saw a contraction of 36% in total.
One thing which is to be noted here is that with the easing of Lockdown restrictions by the government, there have been green patches in certain sectors. Either the sectors have recorded a growth or have contracted on a lesser scale than before. If we take June month into account, even though there has been a contraction, it has grown 20.4% as compared to May. Car sales and Core sector has seen some green shoots after the Unlock 1.0 started by the government in July. But mining, electricity sectors have not been able to pick up much in this Unlock Phase because of localized lockdowns in States, at the same time consumer non-durable saw a growth of 14%. One of the main reasons for such mixed signals from the Economy is the fact that the Corona Virus spread has been uneven. While the country is blessed to be in such a situation wherein this allows the authorities to put a tight leash to it, it has become an irritant for the Industry.
The Credit rating Agencies in India are pointing unanimously towards a Contraction in GDP for the First Quarter, the results of which will be out by the end of this month. Institutions like CARE and ICRA have estimated a contraction of 20-25% in Quarterly GDP figures. The GDP has found some cushion from the good harvest this season leading to good agricultural growth and the stimulus package that has been announced by the government. Apart from the Pharmaceutical industries and Tobacco, all other 21 sub-sectors are deep in Red.
The Reserve Bank of India has acknowledged the fact that the GDP will see a contraction, but to what extent is the question. This is a huge admission on part of an Institution which represents the Central government, keeping in mind the fact that the government previously said that the Indian Economy might not contract but grow at a meager rate of 0.5-2%.
