BENGALURU: India’s economy contracted at its steepest pace of 23.9% in the June quarter as the pandemic lockdown dented consumer and business spending, putting pressure on the government and central bank for further stimulus and a rate cut.
The gross domestic product (GDP) data released on Monday showed consumer spending, private investments and exports all collapsed during the world’s strictest lockdown imposed in late March to combat the COVID-19 pandemic.
A Reuters poll of economists had forecast that gross domestic product in world’s fifth-largest economy will contract by 18.3% in the June quarter, compared with 3.1% growth in the previous quarter, the worst performance in at least eight years.
COMMENTARY
ADITI NAYAR, PRINCIPAL ECONOMIST, ICRA, GURUGRAM “The GDP and GVA plunged precipitously in the lockdown-ridden Q1 of FY2021, both printing similar to our forecast of a 25% contraction. Moreover, incoming data on the MSME and less-formal sectors could manifest in a deeper contraction when revised data is released subsequently. We maintain our forecast that the Indian economy will contract by 9.5% in FY2021.
“The wide discrepancy between the double-digit growth of the government’s final consumption expenditure and the contraction in public administration, defense and other services on the production side, is rather incongruous.”
SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI “Real GDP growth at (-)23.9% in 1QFY21 was much lower than what the markets were expecting. The choice for the government will be on whether the consumption or the investment side needs to be pushed. Given the limited fiscal space and the need to stimulate a more durable growth, the growth recovery will be gradual and is likely to continue into 1HFY22.”
MADHAVI ARORA, LEAD ECONOMIST, FX AND RATES, EDELWEISS SECURITIES, MUMBAI “The Q1 GDP growth print came in worse than our expectations of -18%. The surprise take-away elements were the better-than-expected performance of finance and real estate sector, and more pertinently, a sharp contraction in public administration (proxy for government spending) data. Nonetheless, it does little to change the broad contours of the growth trajectory.
“The sub-optimal policy response would only mean the downward cycle could stretch further, while structural constraints limit sustained secular growth pick-up ahead. We think the government will have to loosen its fiscal strings further in 2HFY21 if growth prospects remain weak.”
SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM
“Given the lack of reporting due to the lockdown in Q1 (especially for the informal sector), we expect the GDP numbers to be revised down further in subsequent releases. Excluding agriculture, GVA actually contracted by -27% in Q1.
“Hopes of an economic recovery in the second half of the year have been pinned on a rural sector revival. However, with the virus spreading to the hinterland, the rural support might be lower than expected.
“In terms of the growth prints, Q1 is likely to be the worst print and it will be a very slow grind up from this bottom going forward. We continue to expect a -7.5% growth print for the year with a downward bias to our forecast.”
RAJANI SINHA, CHIEF ECONOMIST, KNIGHT FRANK INDIA,MUMBAI “The sharp fall in the first-quarter GDP is on expected lines, given that around 70-80% of the economy was on a standstill in the first two months of this quarter.
“As expected, Private Final Consumption Expenditure and Investments have contracted sharply in this quarter, while the positive agriculture growth has been the silver lining.
“With the economy unlocking in the last few months, most economic parameters have improved to 70-90% level of the corresponding period of last year. However, a sustainable recovery would depend on the time taken to contain the spread of virus. Increased infrastructure investment by the government and demand-boosting measures are much required for the economy to recover.”
SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI
“This kind of a decline was expected as there was a lockdown for roughly half of the quarter. Monday’s infrastructure data showed the decline was less than 10% and with the exception of cement and steel, all other sectors have done reasonably well.
“The Reserve Bank of India (RBI) won’t lose too much sleep on this number as it was expected. The RBI still has its focus on growth. This (GDP number) slightly improves chances of a rate cut in October. Unless the inflation comes below 5% in the next reading, the RBI still might postpone the rate cut to December.”
RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI
“Contraction of real GDP at 23.9% appears to be underestimated, as data collection efforts were hit by the pandemic.
“The NSO had to use substitutes and proxies to estimate the losses of informal sector. So there is a very high probability that this data will undergo several revisions in the future. But broader trends are clearly visible.
“Unless the Central and state governments focus on re-starting the economic machine completely, the real process of repair and reconstruction will not gain momentum. Unless this is given the top-most priority, India will get trapped with the unsustainable debt burden.” UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI “After a record contraction in Q1, we expect the following quarters to normalize registering a much slower fall. The high-frequency data since June has been suggesting a significant pickup in activity. Nonetheless, the weakness in demand is expected to weigh across all sectors and some policy support will be necessary to cushion any further deterioration.
“We expect some kind of stimulus from the government in the coming few months. The recent policy measures from the RBI will help cap any sharp upside risks to bond yields in case of any incremental supply.” SIDDHARTHA SANYAL, CHIEF ECONOMIST AND HEAD OF RESEARCH, BANDHAN BANK, KOLKATA “The GDP contraction of close to 24% y/y during Q1 FY21 was clearly sharper than expected. Also, given the lack of clarity about whether the disruption in informal sector activities were captured adequately, the possibility of further worsening of Q1 FY21 GDP estimate during subsequent rounds of revisions cannot be ruled out. Overall, GDP looks set to record near double-digit contraction during FY21.
“However, rural activities seem to be relatively more resilient at the moment and might benefit from the government’s rural-focused employment schemes. Given the recent uptick in CPI prints, it seems that the RBI may not be in a position to cut rates in the near-future, even though one expects more rate cuts during and/or after the December MPC.”
India’s economy shrinks record 23.9% y/y in first quarter
https://arab.news/zqxsv
India’s economy shrinks record 23.9% y/y in first quarter
AI will never replace human creativity, says SRMG CEO
- Speaking to Maya Hojeij, senior business anchor at Asharq with Bloomberg, Jomana R. Alrashid expressed pride in SRMG platforms that had absorbed and adopted AI
RIYADH: Jomana R. Alrashid, CEO of Saudi Research and Media Group, highlighted how AI cannot replace human creativity during a session at The Family Office’s “Investing Is a Sea” summit at Shura Island on Friday.
“You can never replace human creativity. Journalism at the end of the day, and content creation, is all about storytelling, and that’s a creative role that AI does not have the power to do just yet,” Alrashid told the investment summit.
“We will never eliminate that human role which comes in to actually tell that story, do the actual investigative reporting around it, make sure to be able to also tell you what’s news or what’s factual from what’s wrong ... what’s a misinformation from bias, and that’s the bigger role that the editorial player does in the newsroom.”
Speaking on the topic of AI, moderated by Maya Hojeij, senior business anchor at Asharq with Bloomberg, the CEO expressed her pride in SRMG platforms that had absorbed and adopted AI in a way that was “transformative.”
“We are now translating all of our content leveraging AI. We are also now being able to create documentaries leveraging AI. We now have AI-facilitated fact-checking, AI facilities clipping, transcribing. This is what we believe is the future.”
Alrashid was asked what the journalist of the future would look like. “He’s a journalist and an engineer. He’s someone who needs to understand data. And I think this is another topic that is extremely important, understanding the data that you’re working with,” she said.
“This is something that AI has facilitated as well. I must say that over the past 20 years in the region, especially when it comes to media companies, we did not understand the importance of data.”
The CEO highlighted that previously, media would rely on polling, surveys or viewership numbers, but now more detailed information about what viewers wanted was available.
During the fireside session, Alrashid was asked how the international community viewed the Middle Eastern media. Alrashid said that over the past decades it had played a critical role in informing wider audiences about issues that were extremely complex — politically, culturally and economically — and continued to play that role.
“Right now it has a bigger role to play, given the role again of social media, citizen journalists, content creators. But I also do believe that it has been facilitated by the power that AI has. Now immediately, you can ensure that that kind of content that is being created by credible, tier-A journalists, world-class journalists, can travel beyond its borders, can travel instantly to target different geographies, different people, different countries, in different languages, in different formats.”
She said that there was a big opportunity for Arab media not to be limited to simply Arab consumption, but to finally transcend borders and be available in different languages and to cater to their audiences.
The CEO expressed optimism about the future, emphasizing the importance of having a clear vision, a strong strategy, and full team alignment.
Traditional advertising models, once centered on television and print, were rapidly changing, with social media platforms now dominating advertising revenue.
“It’s drastically changing. Ultimately in the past, we used to compete with one another over viewership. But now we’re also competing with the likes of social media platforms; 80 percent of the advertising revenue in the Middle East goes to the social media platforms, but that means that there’s 80 percent interest opportunities.”
She said that the challenge was to create the right content on these platforms that engaged the target audiences and enabled commercial partnerships. “I don’t think this is a secret, but brands do not like to advertise with news channels. Ultimately, it’s always related with either conflict or war, which is a deterrent to advertisers.
“And that’s why we’ve entered new verticals such as sports. And that’s why we also double down on our lifestyle vertical. Ultimately, we have the largest market share when it comes to lifestyle ... And we’ve launched new platforms such as Billboard Arabia that gives us an entry into music.”
Alrashid said this was why the group was in a strong position to counter the decline in advertising revenues across different platforms, and by introducing new products.
“Another very important IP that we’ve created is events attached to the brands that have been operating in the region for 30-plus years. Any IP or any title right now that doesn’t have an event attached to it is missing out on a very big commercial opportunity that allows us to sit in a room, exchange ideas, talk to one another, get to know one another behind the screen.”
The CEO said that disruption was now constant and often self-driving, adding that the future of the industry was often in storytelling and the ability to innovate by creating persuasive content that connected directly with the audience.
“But the next disruption is going to continue to come from AI. And how quickly this tool and this very powerful technology evolves. And whether we are in a position to cope with it, adapt to it, and absorb it fully or not.”
