GDP

The economy shrank at a rate of 7.5% year-on-year in the third quarter, beating analysts’
expectations of an 8.8% decrease, after contracting 23.9% in the second quarter. The more
moderate fall was mainly the result of easing lockdown measures and ample monetary stimulus,
which propped up domestic demand.

On the domestic front, the improvement was predominately driven by private consumption and fixed
investment compared to the previous period. Household spending decreased at a rate of 11.3%
year-on-year in Q3, following the 26.7% contraction in Q2. Fixed investment also fell at a more
moderate pace of 7.4% in Q3. In contrast, government spending plunged 22.2% in Q3 (Q2: +16.4%
yoy).

On the external front, exports of goods and services fell 1.5% in the third quarter, improving from the
second quarter's 19.8% contraction. In addition, imports of goods and services dropped at a rate of
17.2% in Q3 (Q2: -40.4% yoy). Consequently, the external sector contributed 3.4 percentage to
overall GDP, but this was down from the 5.5 percentage-point contribution in the second quarter.

Looking ahead, the economy is expected to contract deeply this fiscal year, as containment
measures to control the spread of the virus and weak external demand weigh on economic activity.
Meanwhile, despite strong monetary stimulus, fiscal measures to support the economy have been
well below par—likely hampering the recovery .

Moreover, positive news on the vaccine should help increase the external demand, further
supporting the recovery ahead.

economy contracting 9.3% in FY 2020 (April 2020–March 2021), which is down 0.2 percentage
points. In FY 2021, economist projects GDP to expand 9.2%.

INFLATION

Inflation hits highest level since May 2014 in October

Consumer prices rose 1.27%in october, accelerating from the 1.10% rise seen in September. The
increase was largely driven by rising prices for food and beverages. In addition, price pressures for
fuel and light rose notably in October.

Inflation increased to 7.6% in October, which was up from September’s 7.3%. October's result
represented the highest inflation rate since roughly six-and-a-half years. Annual average inflation
rose to 6.7% in October (September: 6.5%).

Economist project consumer price inflation to average 5.1% in FY 2020. The estimate is up 0.1
percentage . In FY 2021, the economist also project inflation to average 4.3%.

INTERESR RATE

As we can see the yield curve is rising up which means that the prices of the bond are decreasing.
But we can also see that the curve towards the end is flattening which means that the difference
between yields on short term bonds and yields on long term bonds decreases. Also, the intrinsic
value of the bond has been decreasing so they are demanding more rate of return and the premium
is also sinking.

UNEMPLOYMENT

India's unemployment rate rose sharply to 9.1 per cent in December 2020,
highest since the beginning of India's recovery from the lockdown in June, the
Centre for Monitoring Indian Economy (CMIE) said on Monday.
Unemployment rate stood at 10.99 per cent in June 2020.
The unemployment rate rose to 8.4 per cent in the first week ended December
6, further to 9.9 per cent and 10.1 per cent in the following two weeks before
moderating to 9.5 per cent in the last week

According to CMIE, the employment rate is the best measure of the health of the Indian
economy as it measures the proportion of the working age population that are
employed.
The employment rate was 39.4% in 2019-20. It dropped to 27.2% in April and stood at
30.2% in May after which it rose to 37.8% in October.