As per the National Statistics Office, the estimated H2FY21 recovery in overall growth will likely be driven by services sector contracting around 1.1 percent in H2FY21 as against 15.9 percent in H1, led by real estate services among others.
The National Statistics Office (NSO) on January 7 released its first Advance Estimates (AE) of GDP for the year 2020-21. The real GDP at 2011-12 prices in 2020-21 has been estimated to contract 7.7 percent and nominal GDP at current prices by 4.2 per cent.
As per quarterly estimates of NSO, real GDP contracted by 15.7 percent in the first half of 2020-21. Real GDP on a quarter-on-quarter basis grew at 21 percent from Q1FY21 to Q2FY21. The AE of 2020-21 reflects a continued resurgence in economic activity in Q3 and Q4 – which would enable the Indian economy to end the year with a contraction of 7.7 percent. The continuous quarter-on-quarter growth endorses the strength of economic fundamentals of the country to sustain a post-lockdown V-shaped recovery, it said.
On the demand side, real GDP in 2020-21 has been supported by an estimated increase in government consumption expenditure by 5.8 percent. On the supply side, agriculture is estimated to register positive growth of 3.4 percent against 4.0 percent as per the PE of 2019-20.
In the manufacturing sector, the electricity sector is estimated to register a growth of 2.7 percent. The pandemic and associated public health measures have adversely affected the contact-sensitive services sector where trade, hotels, transport and communication are estimated to contract by 21.4 percent in FY2020-21, it said.
“The estimated H2FY21 growth recovery will likely be driven by services. The services de-growth will likely moderate sharply to -1.1 percent in H2FY21 as against -15.9 percent in H1FY21, led by financial, insurance, real estate services. Public spending will be another major growth contributor in the remainder of the year,” an analysis of NSO data by Emkay India Equity Research has said.
“The second half of FY21 is expected to have much better economic activities compared to the first half due to the withdrawal of lockdown and resumption of business activities backed by timely policy interventions from government and RBI. We believe the services sector is expected to play a significant role in the recovery of GDP growth during this period,” said Samantak Das, chief economist and head of research & REIS, India, JLL.
‘Real estate services’ being one of the important components of the services sector, it is already showing promising signs of revival both in residential and commercial segments. At the same time, we expect strong traction from other segments like industrial/warehousing, healthcare, data centre, etc. With government’s vaccination rollout plan in place, consumer confidence is going to improve which will auger well on the demand-side economics of the country, he added.
“The economy of a country has both direct and indirect correlation with real estate and its health often impacts the value of real estate and the overall sentiments. It is measured by economic indicators like GDP, employment data, manufacturing activity etc. Broadly speaking, if the economy is sluggish then so is the real estate and contraction in GDP does lead to lower all-round sentiments amidst fear of job losses,” explained Anuj Puri, Chairman - ANAROCK Property Consultants.
That said, if we consider recent data trends then the rate of India’s economic rebound has gained pace in the second half with data suggesting that the pre-Covid levels could be achieved earlier than estimated, he said.
The rate of contraction has definitely slowed down and there has been visible uptake in economic activity in the recent past especially during the festive season.
Even real estate - which makes a significant contribution to the GDP – is seeing visible signs of recovery with residential sales rising significantly in the festive quarter.
As per ANAROCK research, the first three quarters of FY21 (April to December) saw total residential sales of 93,150 units across the top 7 cities in which festive period (Oct.-Dec.) alone comprised 55 percent share. Similarly, other service sectors namely financial and insurance have also gained momentum, thereby positively impacting the overall economy.
Colliers' analysis of Q3 numbers also suggests the real estate sector is showing definitive signs of recovery.
"Both the major sectors of housing and commercial office have recorded a high number of transactions as buyer and occupier confidence has strengthened in the country’s economic recovery and the calendar year 2020 closed with better than expected results. Consequently, we agree with the CSO’s estimates that the momentum will continue in the balance quarter of the financial year 2020-21, and the overall growth in H2FY21 will record positive numbers," said Siddhart Goel, Senior Director, Research at Colliers International India.