Banking giant makes India GDP forecast

DBS bank expects the the Indian economy to post strong GDP growth as the country continues to recover well from the impacts of the second COVID-19 wave.

The bank today tipped GDP growth of around 21% year-on-year for the second quarter of 2021. It comes off a base of -24% for Q2 2020, a period severely impacted by the first COVID-19 wave.

“A sharp rise in daily COVID cases peaked in early part of May at ~400k, before receding to 45-50k in late-June. Humanitarian costs of the health crisis were immense, but the economic impact was less severe than the first wave and activity rebounded faster,” said DBS economist, Radhika Rao

“Less stringent localised restrictions during the second COVID wave likely impacted industrial activity less severely than the first wave. Industrial production rose 59% y/y in the June quarter vs 6.8% in Jan-Mar21, benefiting from base effects, whilst q/q growth declined. PMI manufacturing slipped into contractionary terrain in June before recovering in July.

“Construction activity, which suffered during the first wave, remained partly operational during the second COVID wave, as evidenced by higher steel and cement output, as well as relatively stable employment in the sector through the second wave.”

Official India GDP data for the quarter is expected to be released later this month.