RBI in its December policy meeting upgraded India’s GDP forecast and expects economy to shrink 7.5% this fiscal vs earlier forecast of 9.5% contraction as the economy is recuperating faster than anticipated. Further, even the IMF upgraded its forecast for GDP growth in FY22 (8.8% growth earlier to 11.5% growth) making it the only key nation to record a double-digit growth and reclaim the status of world’s fastest growing major economy.
Additionally, RBI expects growth to be in positive trajectory for Oct-Dec 2020 period and predicts a V-shaped recovery in FY21 driven by rollout of vaccine. Also, since mid-September, India has done well to flatten the curve of Covid-19 cases. The number of active cases had fallen to 1.5 lakh from a peak of 10 lakh cases in September.
FY21 is half done and the macro data available till now shows the hits to the economy because of the coronavirus pandemic. However, there are signs of revival. After the country’s economy contracted by a record 23.9% in April-June quarter, contraction for Q2’21 is expected to be around 8.6% as projected by RBI.
However, recent data suggests brightening prospects for October and if this upturn sustains, the Indian economy may return to growth in October-December quarter, thereby making a case for GDP upgrades soon.
Global Stock Markets
Despite the pandemic, the global stock markets (especially the US market) continue to be on steroids driven mainly by excess liquidity, positive sentiment post Joe Biden’s victory and also recent announcement by Pfizer and Moderna on positive vaccine update.
June quarter GDP contraction was quite serious
across the globe on account of ‘Stay at Home’ strategy adopted by most governments.
India was amongst the worst hit with 23.9% contraction in GDP. Unfortunately,
the population density and the sheer size of population resulted in India
having the 2nd highest cases in the world after USA.
However, with economies gradually opening up,
recent data suggest stability is coming back in various sectors of the economy
with many of the auto majors showing Y-o-Y growth in August, construction
activity now coming back to almost pre-COVID level, credit card spends
witnessing Y-o-Y growth as per August month data, rural dependent sectors
showing higher growth month-on-month on the back of better monsoon and higher
Global Stock Markets
Despite the pandemic, the global stock markets
(especially the US market) continue to be on steroids driven mainly by excess
liquidity as well as lack of investment opportunities.
The year 2020 has been more than what we bargained for. From a pandemic called COVID-19 hitting almost the entire world, to the hardships caused by the lockdown to several businesses, to border tensions, and fears of a slump in corporate profitability, to cancellation and/or postponement of major sporting and social events, this has been quite a year so far.
The stock market in India has seen quite a roller-coaster ride. The S&P BSE Sensitive Index had fallen from a high of 42,273.9 in January 2020 to 25,638.9 in March 2020 (a fall of over 39%). This has been one of the sharpest falls in India’s stock market ever. However, the Index has staged a decent recovery, and at the end of June 2020, has risen to 34,915.8, which is a rise of 36% from the bottom of the year.
Global economic growth is forecast to edge up to 2.5% in 2020 as investment and trade gradually recover from last year’s significant weakness but downward risks persist with advanced economies growth slipping to 1.4% whereas emerging and developing economies expected to grow at 4.1%.
Corona Virus: There will be an impact on global trades considering recent incidences of effected cases of virus in countries other than China and hence broadly global markets will remain volatile including India.