India’s GDP Growth: Q3 2019-20 and 2nd AE FY20

29 February 2020

CSO has released GDP growth for Q3-FY20 and the 2nd advance estimate for FY20 and both the numbers manifest the slowdown in the Indian economy. India’s GDP grew by 4.7% in Q3-FY20, 0.9% lower than the corresponding quarter a year ago. There has been an upward revision in the quarterly growth of both Q1-FY20 and Q2-FY20 by 60 bps with growth estimated at 5.6% and 5.1% for the respective quarters. GVA growth for Q3-FY20 has been estimated at 4.5%, lower by 1.1% than corresponding quarter a year ago. The GDP growth estimate for Q3-FY20 has been marginally higher than CARE Ratings’ estimate of 4.5%. The 2nd AE of GDP growth for FY20 has been estimated at 5%, which is the lowest since the commencement of the 2011-12 series and is estimated to be almost 1.1% lower from a year ago.

On the sectoral front, the notable decline in GDP growth in Q3-FY20 has been on account of contraction in components like electricity and manufacturing coupled with moderate pick-up in construction activities. However, positive growth in mining and quarrying along with higher government spending has limited the decline in growth.

                                                    Chart 1: Quarterly GDP growth (%)

Based on the expenditure method, robust and double digit growth in consumption along with higher government expenditure has driven the overall GDP growth in Q3-FY20. However, contraction in GFCF has limited the upside.

Sectoral Performance – Q3 FY20

  • Agriculture is estimated to grow by 3.5% in Q3-FY20 compared with 2% in Q3-FY19 on the back of record production of food grains and robust growth in the production of major crops.
  • Manufacturing component is estimated to contract by 0.2% as against de-growth of 4.4% in Q3-FY19. The contraction can be validated moderate in uptick in operating profits of the corporate sector (excluding finance companies) and negative growth in IIP-manufacturing component. The negative growth in the manufacturing indicates lack of demand in this economy.
  • There has been a significant decline in the electricity component from 9.5% growth in Q3-Fy19 to a negative growth of 0.7% in Q3-FY20. This has weighed heavily on the overall growth in Q3.
  • There has also been a significant decline in case of construction activity from 6.6% in Q3-FY19 to a moderate pickup of 0.3% in Q3-FY20. The flat growth in case of cement and steel during the quarter has weighed on this segment.
  • Financial services, real estate and professional services (7.3%) and public administration (9.7%) have limited the downside pressure on GVA during the quarter. Both these segments have seen higher growth compared with corresponding quarter a year ago.
  • There has been a perceptible upside in case of mining and quarrying activity with growth in this segment estimated at 3.2% in Q3-FY20 as against a contraction of 4.4% a year ago.
  • Barring agriculture and public administration, the core GVA growth is estimated at 3.7% in Q3-FY20, significantly lower from the 6.2% growth recorded a year ago. This indicates that the public sector propelled growth during the quarter gone by.       

Table 1 Sectoral Growth Estimates (constant prices)

     Expenditure side analysis:

The growth in private consumption (which accounts for 62.4% of GDP) moderated from 11% in Q3-FY19 to 10.2% in Q3-FY20.There has been a notable growth seen in government spending from 10.6% in Q3-FY19 to 17.1% in Q3- FY20. Both these components have been the key drivers of growth in Q3-FY20.

The investment activity, as measured by GFCF (as a % of GDP) has declined to 26.1% in Q3-FY20 compared with 29.1% shared in corresponding quarter a year ago. The decline in growth in GFCF has been significant at 3.3% in Q3-FY20 as against a robust growth of 16.3% seen in Q3-FY19.

Table 2: Growth in Expenditure of GDP (constant prices)

Table 2: Growth in Expenditure of GDP (constant prices)

2 nd Advance Estimates of GDP – FY20

CSO has estimated GDP to grow by 5% for the full year, 1.1% lower from a year ago. Though higher government expenditure has supported the growth for the year, contraction in case of GFCF and exports coupled with moderate growth in consumption has weighed on the overall GDP growth for FY20.

Chart 3: Annual GDP growth (%)

CARE Ratings’ view:

We have retained our GDP growth projections at 5% for FY20 with a downward bias on account of disruption in global supply chains from the outbreak of corona virus seen across the globe.


Madan Sabnavis, Chief Economist

Sushant Hede, Associate Economist


Rachna Gupta, Manager – Training


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