India’s gross domestic product or GDP contracted by 23.9 per cent in the April-June period, official data showed today, as the coronavirus pandemic-induced disruptions hurt businesses and livelihoods despite monetary and fiscal support of Rs 21 lakh crore. That marked the worst decline in the economy since 1996 when India began publishing quarterly figures, and the worst among major Asian economies. Economists, analysts and investors had keenly awaited today’s reading, which fully captures the impact of the coronavirus crisis on economic and business activity.
Here are 10 things to know:
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The data comes as the government is strategically removing restrictions imposed in March to curb COVID-19 infections, which have caused thousands of job losses and forced the majority of workforce to stay indoors, leading to a big blow to an already-slowing economy.
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Economists in a poll by news agency Bloomberg had expected contraction in the June quarter to be in the range of 15-25.9 per cent, with a median estimate of 19.2 per cent.
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Today’s data marks the likely onset of India’s deepest recession on record, which is widely expected to run through the second half of the fiscal year, as the rapid spread of the pandemic continues to weigh on demand, hindering a pickup in economic activity. Typically, recession is defined as two consecutive quarters of decreasing GDP.
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COVID-19 is spreading faster in India than anywhere else in the world, as 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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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 was already 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.
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It has already shifted gears to focus on economic health for the time being, instead of inflation.
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Before 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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Even before the COVID-19 outbreak, 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.
