Indian GDP to contract by 7-9% in FY21; Q2 numbers a positive surprise

Despite the base effect, agriculture and allied activities maintained a steady growth of 3.4 per cent in Q2 FY2021

Despite the entirely expected, yet unpalatable confirmation that India indeed entered into a recession in H1 FY2021, the GDP data for Q2 FY2021 did contain a positive surprise. The pace of GDP contraction narrowed sharply to 7.5 per cent in the just-concluded quarter, from the deep 23.9 per cent in Q1 FY2021 that was riddled with the lockdowns. The initial data for Q2 FY2021 revealed a milder contraction than our forecast of 9.5 per cent, primarily driven by a better-than-expected performance of manufacturing, electricity and construction, and to a smaller extent, agriculture. 
 

While manufacturing volumes continued to contract, the GVA