Economists expect business activity to have recovered after months of slowdown caused by the coronavirus
India’s gross domestic product (GDP) contracted 7.5 percent in the July-September period, as the economy rebounded from a record 23.9 percent drop in the previous quarter due to the slowdown caused for the coronavirus pandemic. Today’s data confirm the first technical recession in the economy, which is two consecutive quarters of GDP contraction, since 1996, when the country began quarterly records. The GDP reading for the second quarter of the current financial year is much better than economists’ forecast of 8.8 percent in a Reuters news agency survey.
However, the economy is on track to post an overall 8.7 percent contraction for the full year, which, if it occurs, would be its worst performance in more than four decades.
The latest data offers hope of recovery after thousands of jobs lost and most of the workforce remaining indoors as a result of restrictions related to COVID-19, a major blow to an already slowing economy.
There has been a drop in daily coronavirus cases in the country, which have dropped to half from their peak of more than 97,000 infections a day in mid-September. COVID-19 infections in India have exceeded 9.27 million, making it the second most affected country in the world after the United States.
As some states reimposed restrictions this week to combat a second wave of infections, companies feared the restrictions could slow the pace of recovery in the next two to three months, as well as increase the risk of inflation.
Many economists expect the economy to return to expansion mode as early as the December quarter, as the recovery continues.
They predict a 3 percent contraction in the December quarter, followed by a 0.5 percent expansion in the final January-March period of the 2020-21 financial year.
The economy is expected to rebound early next year in hopes of better consumer demand fueled by progress in coronavirus vaccines, say economists, who have marginally raised forecasts following a pickup in demand. of auto, nondurable goods and rail consumers during festival season.
Recently, the government announced additional stimulus measures as part of its Atmanirbhar Bharat series of announcements.
Under Atmanirbhar Bharat 3.0, Finance Minister Nirmala Sitharaman listed measures worth Rs 2.65 lakh crore with a focus on job creation and sectors such as real estate, bringing full monetary and fiscal aid in the country’s battle against COVID-19 at Rs 29.88 lakh crore or 15 percent of its GDP.
On Thursday, RBI Governor Shaktikanta Das highlighted a stronger-than-expected recovery from the coronavirus-led lockdown, hinting at continued support for monetary policy to revive the economy. The RBI chief’s comments in his speech at an event come days before the scheduled bi-monthly review of central bank policy.
The RBI has been doing the heavy lifting to provide stimulus to the economy, having cut key benchmark rates by a total of 115 basis points (1.15 percentage points) so far this calendar year. The central bank has infused liquidity and transferred cillions of rupees in dividends to the government, despite inflation remaining well beyond its comfort level of 2 to 6 percent.
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