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Sports / Business

India's GDP Drops By 23.9%, Sharpest Contraction On Record

August 31, 2020 06:24 PM

New Delhi, August 31
India's gross domestic product or GDP contracted 23.9 per cent in the April-June period, official data showed today, as the coronavirus pandemic-induced disruptions hurt businesses and livelihoods despite monetary and fiscal support of Rs 21 lakh crore.

That 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 coronavirus crisis on economic and business activity - is in stark contrast with expansion of 3.1 per cent in the previous quarter, and 5.2 per cent in the quarter ended June 30, 2019.

Today's data marks the likely onset of India's deepest recession on record, which is widely expected to run through the second half of the fiscal year, as the rapid spread of the pandemic continues to weigh on demand, hindering a pickup in economic activity.

Typically, recession is defined as two consecutive quarters of decreasing GDP.
The data comes as the government is strategically removing restrictions imposed in March to curb COVID-19 infections, which have caused thousands of job losses and forced the majority of workforce to stay indoors, leading to a big blow to an already-slowing economy.

Economists in a poll by news agency Bloomberg had expected contraction in the June quarter to be in the range of 15-25.9 per cent, with a median estimate of 19.2 per cent.
Though the coronavirus-related restrictions have been gradually lifted, there has been an impact on the economic activities as well as on the data collection mechanisms, the government's statistics office said.

COVID-19 is spreading faster in India than anywhere else in the world, as daily tallies have exceeded those of the US and Brazil for almost two weeks. India currently has more than 3.54 million cases, and 63, 498 deaths.
Challenges related to other underlying macroeconomic indicators such as industrial production and consumer inflation will also have implications on these estimates, it said, mentioning likely revisions "in due course".
Economists say the rapid increase in COVID-19 cases amid stretched public finances and soaring inflation means a recovery may not take place soon.

In May, the government announced fiscal and monetary support worth Rs 21 lakh crore, equivalent to roughly 10 per cent of the country's GDP. Many economists have said that much of that support was already budgeted for, by the government and very little included new spending.

The Reserve Bank of India has reduced the key interest rates by 115 basis points (1.15 percentage point) since March to revive economic activity, but is watchful of worsening inflationary pressures. It has already shifted gears to focus on economic health for the time being, instead of inflation.
Before the pandemic, Prime Minister Narendra Modi's administration was aiming at transforming India from a $2.8-trillion economy in to $5 trillion mark by 2024, despite slowing growth and low demand.


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