The economy contracted 23.9% in the three months ending in June, compared to the previous year, according to official statistics released Monday. The collapse of the world’s fifth-largest economy was worse than economists expected and one of the most severe contractions of any nation as a result of the pandemic.
Investment collapsed 47% compared to the previous year, while household consumption contracted almost 27%, according to Capital Economics. Government consumption rose 16%, but that was not enough to offset the sharp decline in activity in other sectors.
Shilan Shah of Capital Economics said that the second quarter should mark the lowest point for the Indian economy, but there are indications that the recovery could be very slow despite the loosening measures. A key measure of manufacturing activity declined in July and output from infrastructure industries remains depressed.
“The continued and rapid spread of the coronavirus will curb domestic demand,” Shah said. “What’s more, the disappointing fiscal response to the crisis will guarantee a legacy of higher unemployment, business failures and a deteriorating banking sector that will weigh heavily on investment and consumption.”
India, once the world’s fastest-growing major economy, limped into 2020 as consumer demand declined and the country’s auto sector struggled. Then the coronavirus arrived.
India has recorded more than 3.6 million cases of coronavirus, according to data from Johns Hopkins University, and approximately 64,500 people have died from the disease. The numbers are rising rapidly: It took India nearly six months to register 1 million cases, another three weeks to reach 2 million, and just 16 more days to reach 3 million.
Covid-19 has had a significant impact on the economy of all countries. Every member of the G7 – Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States – is officially in recession, for example.
The clear outlier among the major economies is China, which catapulted into recovery mode in the second quarter after a fall in GDP between January and March, its worst performance in a three-month period in decades.
– Julia Horowitz and Swati Gupta contributed reporting.
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