India’s Gross Domestic Product growth rate contracted by 7.5% for the second quarter (July-September) of the current financial year, government data showed on Friday. With this, the country’s economy slipped into a technical recessionary phase for the first time ever – when its GDP growth is negative or declining for two consecutive quarters or more.
India’s economy had contracted by an unprecedented 23.9% in the first quarter (April-June) of this financial year, after being hit by the coronavirus pandemic and the subsequent economic slowdown.
In gross value added terms, the economy has now contracted 7% compared to a fall of 22.8% in the last quarter, showed the data released by the Ministry of Statistics and Programme Implementation.
Sector wise breakup revealed that mining contracted 9.1% compared to a fall of 23.3% in the last quarter. Construction contracted 8.6% in the July-September period as against to a drop of 50.3% last time. Meanwhile, the trade, hotel, transport, communication segments fell 15.6% in comparison to last quarter’s 47% fall. The public administration segment, supported by government spending, contracted 12.2% versus a drop of 10.3%. The financial services sector contracted 8.1% compared to a contraction of 5.3% in the previous quarter.
Manufacturing sector showed a growth of 0.6% in the second quarter after a fall of 39.3% in the preceding one. Similarly, electricity and other public utilities grew 4.4% against a contraction of 7% in the last quarter.
The second quarter GDP numbers are higher than the Reserve Bank of India’s estimation, made earlier this month. The central bank in a bulletin had predicted that the growth rate will contract by 8.6% in the second quarter.
The RBI had, however, noted that the contraction is “ebbing with gradual normalisation in activities and expected to be short-lived”. Economic activity picked-up peace after the government eased pandemic related restrictions in the country.
Earlier on Friday, government data showed that India’s fiscal deficit in October stood at Rs 9.53 lakh crore, or 126.7% of the budgeted target for the whole fiscal year, reported Reuters. Data released also showed that India’s core industries growth for October contracted by 2.5%.
The Indian economy, which was already slowing down before the onset of the coronavirus pandemic, dipped to all-time lows in terms of GDP numbers in the first quarter, with economic activities stalled due to the nationwide lockdown imposed in March. Various financial institutions have predicted that India will register a negative growth rate in the full financial year 2020-’21.
Last week, global forecasting firm Oxford Economics said in a report on Thursday that India will be the world’s worst-affected among the major economies even after the coronavirus pandemic weakens.