Economists say the rapid increase in COVID-19 cases means a recovery may not take place soon.
India’s gross domestic product or GDP is widely expected to have shrunk in the April-June period, as data covering the quarter fully captures the damage caused by the fast-spreading coronavirus pandemic. Many economists expect the country to suffer its worth quarterly de-growth since the mid-1990s, with estimates of contraction as bad as 25.9 per cent, as the pandemic-induced disruptions hurt businesses and livelihoods despite monetary and fiscal support of Rs 21 lakh crore. Currently, the country is undergoing a strategic removal of restrictions imposed in March to curb COVID-19 infections, which led to thousands of job losses and forced the majority of workforce to stay indoors, causing a big blow to an already-slowing economy. Official data will be released at 5:30 pm.
Here are 10 things to know about the June Quarter data to be released today
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India is likely entering its deepest recession on record, which is expected to run through the second half of the fiscal year, as the rapid spread of the coronavirus pandemic continues to weigh on demand, hindering a pickup in business and economic activity.
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Forecasts for the expected contraction in the GDP range from 15 per cent to 25.9 per cent, with a median estimate of 19.2 per cent, according to news agency Bloomberg. If that happens, it would mean the country’s worst performance since it began reporting quarterly data in 1996.
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COVID-19 is spreading faster in India than anywhere else in the world, as its 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.
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Economists say the rapid increase in COVID-19 cases amid stretched public finances and soaring inflation means a recovery may not take place soon.
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Economic upticks visible in May and June appear to have lost strength in July and August, mainly due to the re-imposition of pandemic-related restrictions, the RBI said this month, highlighting that the contraction is to “likely prolong into” the second quarter (July-September) of the fiscal year.
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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 had already been budgeted for by the government and very little included new spending.
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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.
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The central bank has said the fallout from the COVID-19 pandemic is likely to push up the gross non-performing assets – or bad loans – in the country’s banking system to at least 12.5 per cent by March 2021, from 8.5 per cent in March 2020. Still, the central bank has asserted it has not run out of tools to rescue the economy.
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Before the onset of 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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However, some economists also say the contraction will ease in the July-September period, and the economy may return to expansionary mode from the second half of the year, as the worst of the coronavirus-caused disruption will likely be behind. Although even before the pandemic, the country’s GDP statistics have been a source of contention, as a change in the methodology to calculate GDP introduced in 2015 made forecasting difficult.
