Nikhil Gupta, Chief Economist at Motilal Oswal Financial Services, feels that India could see inflation worries and growth concerns, following the GDP number.
"As against our forecast of 1.2% and market consensus of 1.6%, real GDP grew 3.1% YoY in 4QFY20. This is only marginally slower than 3.5% in 3Q but the lowest in 11 years (0.2% in 4QFY09). Notably, growth for 1Q-3QFY20 was revised down from 5.4%, 4.8% and 4.5% earlier to 4.8%, 4.3% and 3.5% respectively.
Although the headline numbers are much higher than expectations, details suggest that core real GVA (ex agriculture and community services) grew at all-time low 1.1% YoY in 4Q vs. previous all-time low of 2% in 3QFY20 (since 1998 when quarterly data became available). This was in line with our forecast," he stated.
"Further, private consumption grew only 2.7% (reflecting impact of COVID), while fiscal consumption grew very strongly at 13.6% last quarter. Gross investments declined for third consecutive quarter at 6.5% in 4QFY20.
Overall, better-than-expected growth in agriculture and fiscal spending (explained by 4.6% fiscal deficit in FY20) led to higher GDP growth. We expect real GDP to decline 21% in 1QFY21," he stated.