India Q2 GDP data: Economy claws back some lost ground, contracts 7.5%

“The GDP numbers are better in Q2 when compared with Q1, thanks to easing of lockdowns. From -23% in Q1 to -7.5% in Q2 is definitely recovery and more importantly better than the predictions of many agencies. The growth in manufacturing, though very nominal, is something to cheer for. As in the case of Q1, agriculture has performed well when compared with other sectors. The real test would be in Q4 when the festive season gets to a closure and sustaining the demand would be a challenge, which would be decisive in limiting the economic damage for the year. The dip in private consumption by 11.5% indicates that the demand is still far from normal and that the supportive measures from the government should continue. Concern is that the population should not get into a debt averse mode thereby focusing on savings instead of consumption which could really slow down recovery. However, unlike the case of recession in Japan in 90s, there’s no significant dip in asset prices or large scale impact on balance sheet values – hence sustained fiscal impetus should see us through. Efforts need to be made to improve the psychology of consumption and government should lead the way for a faster recovery,” said Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP.