ICICI Securities expects 28% contraction in GDP & GVA

With the first-quarter GDP data due to be out later in the day, a CNBC-TV18 poll expects a contraction of nearly 20 percent. This will be the first time the GDP data will be out since the outbreak of the COVID-19 pandemic amid expectations that thing will be weak because of the lockdown. Abhishek Upadhyay, Senior Economist at ICICI Securities Primary Dealership speaks with CNBC-TV18.

ICICI Securities expects a 28 percent contraction in both GDP and GVA, Upadhyay said.

“Our expectation is little more pessimistic than what your poll indicates and we are expecting a 28 percent contraction in both GDP and GVA. If you strip out the performance of sectors such as agriculture and government spending something which we like o terms as core GVA which is a less volatile gage of the economy then the fall in core GVA would be even steeper because agriculture and government spending both seemed to have held up relatively better compared to other parts of the economy.”

He further added, “Manufacturing has been quite weak, on an average the performance for the quarter was very weak and we anticipate more than 40 percent of contraction there. What is uncertain is what is happening to services where he high-frequency data is most scarce and particularly services such as finance, insurance, real estate and retail trade, hotel and transport segment which are more than 40 percent of overall output, but these are segments where we get very little data.”

Talking about GDP for full-year he said, “We are anticipating a 5.50 percent contraction for the full year. Our assumption was that starting the second quarter we could see flat to modest growth at least for the second and third quarter before a relatively sharper bounce in the last quarter for the year. Now to the extent that pandemic is still not in control and continues to rage on, which has induced localised restriction measures at the state levels, it is likely that the second-quarter number may again contract so that is a risk to our numbers.”