- September 1, 2020
- Posted by: admin
- Category: Daily News
- India’s real GDP declined y/y by 23.9% in 2Q20, reversing the economy back to its 2014 quarterly level of less than INR27tr.
- Investment demand took the biggest beating from Covid-19 and the nation-wide lockdown announced to arrest its spread. Gross fixed capital formation (GFCF) slumped by 47.5% y/y.
- Construction activity remained virtually absent in Apr 20 due to government restrictions. And even today, after removal of most restrictions, it remains far from its pre-Covid-19 level due to labour shortages, slump in demand for both, residential and commercial real estate, and re-assessment of capex plans by corporates in light of weakened aggregate demand.
- Key inputs in construction cement production and finished steel consumption reported a 38.3% and 52.8% fall, respectively. Their double-digit contraction got extended into Jul 20.
- Findings of CMIE’s CapEx service reveal that industrial & infrastructural project completions shrank to INR192bn in 2Q20 from an average of INR1.5tr per quarter in the last two years, which itself was a period of slowdown.
- Corporates and government announced new projects worth only INR706bn in 2Q20, as compared to an average quarterly announcement of INR3.5tr in 2018-19 and 2019-20.
- The extreme sluggishness in capex activity continued in Jul 20 and Aug 20, with project completions remaining subdued at INR262bn and fresh announcements sedate at INR516bn.
- This, along with statements from large corporates such Tata group of companies, Baja Auto, Maruti Suzuki, Apollo Tyres, Hero MotoCorp, Honda Motorcycle and Scooter India, Mahindra CIE, Adani Ports, Grasim Industries, Godrej Consumer Products and Britannia about deferral of their capex plans suggest that the economy has a long way to go before it gains its investment appetite back.
External Link : https://economicoutlook.cmie.com/kommon/bin/sr.php?kall=wshreport&nvdt=20200901112141106&nvtype=INSIGHTS