India’s gross domestic product (GDP) contracted 23.9 percent in the April-June quarter of 2020-21 compared to the same quarter of the previous financial year, official data released by the National Bureau of Statistics showed ( NSO) on Monday. This was mainly due to limited economic activity in the country during the quarter amid lockdowns to control the spread of the coronavirus pandemic.
This is the first instance of an economic contraction for the country in at least four decades, and also the first drop in GDP since India began publishing quarterly figures in 1996. In the January-March quarter of this year, the economy had grown 3.1% year-on-year, the lowest rate in more than 17 years, and 5.2% in the June 2019-20 quarter. India’s GDP growth rate had declined from 6.1 percent in fiscal 19 to 4.2 percent in fiscal 2020, the lowest in 11 years.
The country’s gross value added (GVA) fell by 22.8%, manufacturing by 39.3% and mining by 23.3%. Gross fixed capital formation (GFCF) contracted 52.9%, electricity 7% and construction activities 50.3%. Agriculture and related activities, meanwhile, were a bright spot, growing 3.4 percent during the quarter.
India is not alone in reporting dismal GDP figures. Even when China managed to counter the trend and actually experienced a 3.20% expansion during the April-June quarter, the UK economy shrank by 21.7%, Germany’s by 10.10% and that of the United States, 9.10%.
The official figures were broadly in line with estimates from various agencies, all of which had forecast a decline in GDP during the quarter. although they had different in the extent of the fall – from 15 percent to 35 percent.
Former chief statistician Pronab Sen had projected a GDP contraction from 25% to 35%, but warned that the NSO could show a much smaller contraction (15-16 percent) because corporate data would be used as a proxy for the informal sector.
ICRA chief economist Aditi Nayar, who had estimated a 25 percent drop, had said: “We caution that the divergence in the performance of the formal and informal sectors may not be fully represented in the GDP data, given the lack of of suitable approximations for the latter. “
Economists surveyed by Bloomberg as of Friday, a 19.2 percent drop in GDP was estimated for the quarter. Bloomberg had quoted HSBC Holdings Plc India chief economist Pranjul Bhandari as saying: “The statistics office could announce a GDP contraction of 17.5% year-on-year, which could subsequently be revised to a 25% contraction when the sector survey informal is available “.
Gradual lockdown and unlock in several states contributed to a sharp 40.7 percent year-on-year contraction in manufacturing volumes, according to ICRA’s Nayar.
India Ratings had projected a fall of 17.03%. “The business disruption from March to May has been so severe for production, supply / trade and activities, especially in sectors such as aviation, tourism, hotels and hospitality, that GDP growth of the fiscal year 21 to contract for the first time since fiscal year 80, “he said. Devendra Pant, Chief Economist at India Ratings.
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