Indian GDP shrank 23.9 % in April -June quarter

 All sectors of Indian economy shrinked except agriculture in last three months


According to official data released on 31st August, Indian GDP has shrunk massive 23.9% in the first quarter April-June.  Statistically speaking, it means that the 2020-21 GDP will be less than what it was in 2019-20. Consumer spending, private investments and exports all collapsed during the world's strictest lockdown imposed in late March to curb the spread of COVID-19.

India, which until a few years ago was the world's fastest-growing large economy - appears to be headed for its first full-year GDP contraction since 1980. Some economists have estimated a GDP contraction of nearly 10 per cent for the year ending March 2021.

India's April-June quarter GDP contracted by a massive 23.9 per cent year-on-year the first GDP contraction in more than 40 years. As per the National Statistical Office (NSO), gross value added (GVA) came in at -22.8 per cent.

GDP estimates for India in 2020 had already painted a very bleak picture. The World Bank had projected 3.2 per cent contraction, while the International Monetary Fund pegged it at 4.5 per cent and the Asian Development Bank at 4 per cent. Nomura had estimated growth at -5.2 per cent, and Icra had recently revised its forecast for contraction in the current fiscal to 9.5 per cent.

Financial services -- the biggest component of India's dominant services sector -- shrank 5.3 per cent last quarter from a year ago.

  Trade, hotels, transport and communication saw 47% dip

  Manufacturing shrank 39.3%, while construction took a 50.3% hit

  Mining output struggled at 23.3%, and electricity and gas dipped by 7%

  The lone bright spot was agriculture; growing at 3.4%

India's economy posted the biggest contraction among major economies last quarter, with a recent surge in coronavirus infections weighing on the outlook for any recovery.

Gross domestic product shrank 23.9 per cent in the three months to June from a year earlier, the Statistics Ministry said in a report Monday. That's the sharpest decline since the nation started publishing quarterly figures in 1996, and was worse than any of the world's biggest economies tracked by Bloomberg. The median estimate in a survey of economists was for an 18 per cent contraction.

India reported more than 78,000 new infections on Sunday, the most by any country

India's economy posted the biggest contraction among major economies last quarter, with a recent surge in coronavirus infections weighing on the outlook for any recovery.

Gross domestic product shrank 23.9 per cent in the three months to June from a year earlier, the Statistics Ministry said in a report Monday. That's the sharpest decline since the nation started publishing quarterly figures in 1996, and was worse than any of the world's biggest economies tracked by Bloomberg. The median estimate in a survey of economists was for an 18 per cent contraction.

Once the world's fastest-growing major economy, India is now on track for its first full-year contraction in more than four decades. While there are early signs that activity began picking up this quarter as lockdown restrictions were eased, the recovery is uncertain as India is quickly becoming the global epicenter for virus infections.

India reported more than 78,000 new infections on Sunday, the most by any country, with total cases nearing 4 million in a nation of 1.3 billion. That could delay the consumption-driven economy from fully reopening.

Even before the pandemic struck, Asia's third-largest economy was in the midst of a slowdown as a crisis in the shadow bank sector hurt new loans and took a toll on consumption, which accounts for some 60 per cent of India's GDP. The lockdown from mid-March to contain the pandemic brought activity to a virtual halt as businesses shut down and millions of workers fled the cities for their rural homes.

The pandemic has caused historic GDP contractions in economies around the world. In India, the situation is made worse by an acceleration in virus cases, more recently in rural areas where the bulk of the population live.

The gloomy outlook puts pressure on authorities to deliver more stimulus, but there's limited room to act. The government is facing a budget deficit of more than 7 per cent of GDP this fiscal year, more than double its original target, while inflation is above the central bank's 2-6 per cent goal, reducing the chances of more rate cuts.

Some economists expect growth to rebound to above 7 per cent next year, mostly led by pent-up domestic demand, and a pickup in farming and exports. Yet, that's likely to fall short of the recovery that followed the global financial crisis more than a decade ago, when growth averaged 8.2 per cent in the two fiscal years after the crisis, boosted by massive fiscal spending, monetary easing and a swift global rebound.

                                                              Khalid Bhatti 

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