India enters recession for the first time since Independence

Andrew Cummings
November 27, 2020

The data was released by the National Statistical Office Friday.

"GDP at Current Prices for Q2 2020-21 is estimated at ₹ 47.22 lakh crore, as against ₹ 49.21 lakh crore in Q2 2019-20, showing a contraction of 4.0 percent as compared to 5.9 percent growth in Q2 2019-20".

The gross domestic product (GDP) had contracted by a record 23.9% in the first quarter of the 2020-21 fiscal (April 2020 to March 2021) as the coronavirus lockdown pummelled economic activity. "Caution is warranted because the economic impact is primarily due to the COVID-19 pandemic", Subramanian said at a media briefing following the release of GDP data.

The index is constructed from 27 monthly indicators using a dynamic factor model and suggests that the economy rebounded sharply from May/June 2020 with the reopening of the economy, with industry normalising faster than contact-intensive service sectors.

He said because of the uncertainty due to a second wave of cases across the country, it will be hard to predict if economic growth reaches positive territory in October-December and January-March quarters.

"I would say that given what we have seen in Q1 and Q2 and with the optimism that is being seen in the estimates, I do see upside potential in that estimates", he said. "In these circumstances, some other data sources such as GST, interactions with professional bodies etc. were also referred to for corroborative evidence and these were clearly limited", the release added.

Continuing its good showing, the agriculture sector grew by 3.4 per cent, while the trade and services sector showed lower-than-expected contraction at 15.6 per cent.

Annual growth of 3.4% in farm sector and 0.6% in manufacturing during September quarter raised hopes of an early recovery as the government gears up to distribute coranavirus vaccines to a country with about 1.4 billion people. However, analysts warned this could be because of low base effect from July-September 2019.

The stimulus, along with festival season demand, has helped spur activity in the economy, with a slew of indicators from auto sales to services sector activity edging higher last month.

The economy was already slowing before the pandemic struck, growing only 4.2 per cent in the last fiscal year, its slowest pace in 11 years.

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