India’s economy contracted 7.5 percent between July and September, being the poorest among the major advanced and emerging economies and entering a technical recession for the first time since independence, official data showed on Friday.
Although the figures were an improvement over last quarter’s record 23.9 percent contraction, they indicate that Asia’s third-largest economy is facing an uphill battle as it attempts to revive demand and create jobs even as coronavirus infections increase.
The two successive quarters of contraction mean that the country has now entered a “technical recession” for the first time since 1947.
After virus lockouts devastated the world, growth in major economies including the United States, Japan and Germany during the quarter ending September 30, raised expectations that India would also enjoy a revival.
But while consumer companies saw a boost from increased spending in the run-up to the holiday season from October to November, hopes for a broader recovery were dashed, and the construction and hospitality sectors fell were affected.
Agriculture remained a relatively bright spot, while manufacturing activity also increased during the July-September period after falling almost 40 percent during the previous quarter due to the lockdown.
New Delhi has struggled to revive an economy that is expected to contract 9.5 percent this year, according to estimates released by India’s central bank governor Shaktikanta Das last month.
Meanwhile, the International Monetary Fund has forecast that India’s economy will shrink 10.3 percent this year, the biggest drop for any major emerging economy and the worst since independence.
An Oxford Economics report published earlier this month said that India would be the worst hit economy even after the pandemic subsides, indicating that annual production would be 12 percent below pre-virus levels through 2025.
India’s economy had struggled to gain traction even before the pandemic, and the hit to global activity from the virus and one of the world’s tightest lockdowns combined to deal the country a severe blow.
The closure in the vast country of 1.3 billion people left large numbers of people unemployed almost overnight, including tens of millions of migrant workers in the shadow economy.
Since then, the government has eased restrictions to reactivate activity, announcing two stimulus packages to offer farmers easier access to credit and distribute benefits to small businesses.
Relaxation measures have been put in place even as the coronavirus continues to devastate the country, which has recorded more than 9.3 million infections, second only to the United States, and more than 135,000 deaths.
In a speech Thursday, central bank governor Das warned that the recent surge in virus cases and the looming threat of further lockdowns pose greater risks to the economy.
“We need to be vigilant about the sustainability of demand after the festivals and a possible reassessment of market expectations around the vaccine,” Das said.
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