The country, over the last 5 months, is reeling under the catastrophic outbreak of the deadly Coronavirus, leading economists predict that the measures to curb the pandemic have heavily dented manufacturing, services and other sectors apart from agriculture during the quarter.
What is more concerning is the fact that in case the estimated data matches with the official figures, it will India's worst economic growth performance ever since the country started reporting quarterly GDP data back in 1996.
The Covid-19 impact
The estimated GDP growth data which will be released by the government later in the day, will be for months of April, May and June - the time when the entire country was undergoing Coronavirus-induced lockdown.
A nationwide lockdown was announced by Prime Minister Narendra Modi on March 24, 2020 for 21 days, which was followed by another lockdown for 19 days.
Various major sectors including manufacturing, real estate, transport, hotels, trade and other which account for nearly half of country's GDP were severely hit during the nationwide lockdown and are yet to recover losses. Experts believe that the GDP growth in Q1 will take a hit because of the slump in these sectors.
The financial parlance
A GDP contraction not only indicates the economy's movement towards a recession, but also underlines the reduction in purchasing power along with lower taxes for the government, higher defaults on debt and falling Capex spends.
India's FY20 GDP had declined to 4.2 per cent from 6.1 per cent in FY19, the slowest in the last 11 years.
On a sequential basis, the quarterly growth rate has progressively declined from 5.2 per cent in Q1 of 2019-20 to 4.4 per cent in Q2, 4.1 per cent in Q3 and 3.1 per cent in the last quarter of 2019-20.
What experts believe
"We estimate a contraction of 17 per cent in Q1FY21 GDP as a direct result of lockdown, supply side constraints, and low to nil activity in non-essential manufacturing and services. While a robust growth in agriculture during this period is going to provide some cushion to the GDP growth, it will be insufficient to substitute the downfall arising out of the contraction caused in the manufacturing and services sector," Sunil Kumar Sinha, Principal Economist, India Ratings & Research, told IANS.
"With domestic economy severely disrupted due to the nationwide lockdown, the contraction in Q1 can be as high as 30 per cent," Sankar Chakraborti, Group CEO, Acuite Ratings & Research, told IANS.
According to Madhavi Arora, Lead Economist, FX and Rates, Edelweiss Securities: "We expect 1Q GDP to contract 18.1 per cent YoY on account of extended lockdown in April-May, weak domestic demand and supply disruptions emanating from both domestic and global front. Core gross value added (GVA) would likely be extremely sluggish, depicting private sector's fragile state.
"In addition to lower raw material prices, pared down employee costs and other cost-cutting measures appear to have protected the margins of various listed companies as compared to our earlier expectations of the impact of the lockdown on profitability," said Aditi Nayar, Principal Economist, ICRA.