India’s Gross Domestic Product growth rate contracted by 23.9% for the April to June quarter as the coronavirus pandemic took a toll on the country’s economy, government data released on Monday said.
This is the first instance of an economic contraction for the country in at least four decades, and also the first GDP decline since India began publishing growth data on a quarterly basis in 1996, according to The Business Standard. The GDP had grown by just 3.1% in the last quarter of 2019-’20 – the lowest in seven years – right as the lockdown was imposed.
In gross value added terms, the economy contracted by 22.8%, showed the data released by the Ministry of Statistics and Programme Implementation.
Sector wise data revealed that the construction industry was worst hit with a contraction of 50.3%, followed by the trade, hotel, transport, communication segments, which contracted 47%. Agriculture and allied activities turned out to be the lone silver lining, which registered a 3.4% growth during the quarter.
Besides this, the mining sector contracted 23.8%, while the manufacturing industry fell by 39.3%. The financial services sector registered a contraction of 5.3%. The government expenditure, as represented by public administration services, also contracted 10.3%.
“With a view to contain spread of the Covid-19 pandemic, restrictions were imposed on the economic activities not deemed essential, as also on the movement of people from 25 March, 2020,” the government said in the report. “Though the restrictions have been gradually lifted, there has been an impact on the economic activities as well as on the data collection mechanisms.”
It added that the timelines for filing statutory returns were extended by most regulatory bodies.“In these circumstances, the usual data sources were substituted by alternatives like GST, interactions with professional bodies etc. and which were clearly limited,” the Centre said.
Earlier in the day, the government data showed that the output of eight core infrastructure sectors dropped by 9.6% in July due to a decline mostly in the production of steel, refinery products and cement. Barring fertiliser, all seven sectors – coal, crude oil, natural gas, refinery products, steel, cement and electricity – recorded negative growth in July.
Despite the government’s plans to strategically ease restrictions of the lockdown, which was first enforced in March, many experts had predicted that the economy would register negative growth. India had imposed a nationwide lockdown on March 25. The lockdown was slowly eased, and by June 1, most non-essential services had been allowed to operate in non-containment zones in the country, subject to policies made by states.
In June, the International Monetary Fund had said that India’s GDP will decline by 4.5% in the 2020-’21 financial year. But it said the Indian economy will bounce back to grow at 6% in 2021-’22.
Economists surveyed by Bloomberg said that India might experience a 18% drop in its GDP growth rate in the first quarter of 2020-’21.
The Opposition Congress has regularly targeted the Narendra Modi-led government over the economic crisis. Congress leader Rahul Gandhi had earlier this month attacked Modi about GDP projections. Gandhi tweeted a news article in Business Standard that quoted businessman NR Narayana Murthy as saying that India’s Gross Domestic Product may hit the lowest rate of growth since Independence. “Modi hai toh mumkin hai [If there is Modi, it is possible],” Gandhi had tweeted. “India’s GDP is expected to shrink by at least 5%,” Murthy had said. “There is a fear that we may even reach the lowest GDP [growth] since independence, since 1947.”