At-23.9%, GDP contracts at its steepest pace on record

At-23.9%, GDP contracts at its steepest pace on record

India’s GDP or GDP was 23.9 percent in the April-June period, official data showed today, as the coronovirus epidemic stalled key industries and left millions unemployed.

This marked the worst incidence of negative growth for the economy since 1996, when India began publishing quarterly figures, and also the worst among major Asian economies.

Today’s reading – which fully captures the impact of the COVID-19 crisis on economic and business activity – contrasted with a 3.1 percent expansion in the previous quarter, and 5.2 percent in the quarter ended 30 June 2019. A survey by Bloomberg, a news agency among economists, estimated contractions in the range of 15–25.9 percent, with an average estimate of 19.2 percent.

Today’s data is expected to mark the beginning of India’s deepest recession on record, widely expected to run through the second half of the fiscal year, as the rapid spread of the epidemic stalled demand, while holding back the boom in economic activity. The weighing continues. Typically, a recession is defined as two consecutive quarters of GDP.

In financial services – the largest component of the country’s services sector, GDP is 5.3 percent lower than the same period a year ago. In manufacturing and construction, it fell by 39.3 percent and 50.3 percent respectively. Agriculture exacerbated the trend, expanding 3.4 percent.

However, restrictions related to coronoviruses have been gradually lifted, affecting economic activity as well as data collection mechanisms, the government statistics office said. Challenges related to other underlying macroeconomic indicators such as industrial production and consumer inflation will also have an impact on these estimates, it said, citing potential amendments “in due time”.

The data comes as the government is strategically removing restrictions to prevent COVID-19 infections in March, leaving thousands of jobs and forcing most of the workforce to stay indoors, leading to earlier It is a major setback for the sluggish economy.

Chief Economic Advisor Krishnamurthy Subramanian said, “India was in all lockdowns with a majority of economic activity during the April to June quarter. So this trend is along expected lines … core sector output clearly V-shaped recovery Is showing. “

COVID-19 is spreading faster in India than anywhere else in the world, as the daily height is more than about two weeks compared to the US and Brazil. There are currently more than 3.54 million cases in India, and 63,498 deaths.
Economists say that COVID-19 cases have increased sharply amidst the tussle over public finances and rising inflation means that recovery may not be quick. Some say that the economy may see a contraction of about 10 percent in the year through March 2021.

In May, PM Narendra Modi announced an incentive package equal to 10 percent of GDP – including credit guarantees on bank loans and free grain to the poor – but consumer demand and manufacturing have yet to recover.

Many economists have stated that that support was budgeted long ago by the government, and involved very little spending.

Just before the epidemic, the government aimed to transform the economy from an estimated $ 2.8 trillion to $ 5 trillion by 2024, despite growth and lower demand.

The Reserve Bank of India has lowered key interest rates by 115 basis points (1.15 percentage points) since March to revive the economy, but inflationary pressures can be seen worsening. It has already changed gears to focus on economic health rather than inflation.