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Q4 GDP expansion to be slow-paced, feel economists

This marks a contrast to the improvement in sentiment brought on by the rollout of the Covid-19 vaccine with a handful assessing the ongoing recovery to be fragile in the absence of investments.

Published: 24th February 2021 09:57 AM  |   Last Updated: 24th February 2021 09:57 AM   |  A+A-

gdp

For representational purposes

By Express News Service

NEW DELHI:  Economists continue to be on the same page with respect to the reasonable pick-up in economic activity, but it should be taken with a pinch of salt. After the broad-based improvement seen in December 2020, the year-on-year (YoY) performance of a majority of the early available economic indicators recorded a loss of momentum in January 2021, relative to the previous month, led by a combination of factors such as the fading of the favourable base effect, supply-side issues and price hikes.

This marks a contrast to the improvement in sentiment brought on by the rollout of the Covid-19 vaccine with a handful assessing the ongoing recovery to be fragile in the absence of investments. “The economic recovery appears to have entered into a consolidation phase in January 2021...We do not construe the dip in volume performance of a majority of the lead indicators in January as a sign of alarm regarding the sustainability of the growth recovery.

However, we do caution that the pace of underlying growth in the economy remains subdued, and we do not foresee a sharp ramp up in the pace of GDP expansion in Q4 FY21,” said Aditi Nayar, Principal Economist, ICRA. As many as nine of the 15 high-frequency indicators including the output of the passenger vehicles, Coal India and motorcycles, vehicle registrations, petrol consumption, ports cargo traffic, generation of GST e-way bills, bank credit and deposits recorded a sequential weakening of their 
performance in January.  

RBI Monetary Policy Committee member  Mridul  Saggar  added that capacity utilisation  is likely to be about 70 per cent by the end of next year, indicating persistently excess capacity over the medium term. He further added that output gap was more likely to close only by the end of the next fiscal year.



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