Sensex Zooms 879 Points; Consumer Durables And Metal Stocks Rally

The sharp reduction in the GDP contraction also led the brokerage to revise up the fiscal deficit estimate by 0.50% to 6.3% as against 4.6% achieved in FY20.

Note that last Friday, the government released gross domestic product (GDP) numbers for the January-March quarter.

India's economy grew at 3.1% in the January-March quarter, its slowest pace in at least eight years. The GDP growth exceeded most estimates made by various rating agencies.

The Indian economy was grappling with its own issues and COVID-19 has made matters worse.

The industry was facing demand problems, due to which business houses were reluctant to undertake CAPEX plans. Unemployment was at its peak and exports were consistently down for several months.

India's GDP growth has been on a consistent decline after peaking out at 7.9% in Q4 of FY18 to 4.7% in Q3 of FY20, as can be seen in the chart below:

Declining GDP Growth for India

Interestingly, there's a silver lining in all this. India can become an outsourcing hub. The global slowdown will mean that countries like the US, will be looking out for low-cost outsourcing destinations like India.

Further, a lot of global buyers have already shifted to India to source ceramics, home appliances, fashion, and lifestyle goods.

Meanwhile, as per the reports, around a thousand foreign manufacturers want to relocate their production to India, a country they see as an alternative to China.

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Disclosure: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research ...

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