A look at revision in GDP estimates and reasons, risks to those projections

Ever since official data showed India’s economy contracted by a better-than-expected 7.5% in the second quarter of FY21, analysts, economists and institutions have revised GDP estimates, forecasting a smaller contraction for the full year than they did previously. Here’s a look at some of these revisions, the reasons behind them and the risks to those projections.

THE DOWNSIDE

• Re-imposition of lockdown restrictions if infections spike
• Domestic consumption slows as pent-up demand is exhausted
• Exports falter due to reinstatement of Covid curbs in major trading partners
• Delays in vaccine deployment dampens sentiment
• Compression in government expenditure

THE UPSIDE

• Q2 contraction of 7.5% was much less than the 23.9% shrinkage in Q1 y-o-y
• Leading indicators such as GST collections, IIP, PMI show sustained improvement
• Feared second wave of Covid infections after festive season has not materialised
• Vaccine availability to boost sentiment and consumer confidence
• Easy financial conditions should help recovery if pandemic concerns recede