India posts worst GDP contraction, only agriculture thrives
NEW DELHI, NNA- Hit hard by the nation-wide lockdown to fight the spread of the coronavirus, the Indian economy contracted sharply by a record 23.9 percent in the first quarter (April-June) of the current fiscal year.
Data released by the country’s Ministry of Statistics and Programme Implementation on Monday showed India's real GDP slumped by 23.9 percent, as opposed to the 5.2 percent growth achieved during the same period last year. It is the first contraction since the publication of quarterly data in 1996.
The stalling of economic activities due to movement restrictions impacted industrial and service sectors heavily.
Interestingly, agriculture was the only seemingly strong sector that thrived by 3.4 percent.
The industrial sector contracted by a massive 38 percent during the quarter. Construction was down by more than 50 percent while manufacturing and mining fell 39.3 and 23.8 percent, respectively.
As trade, hotel, transport and communication plunged by 47 percent, financial services managed to weather through the crisis somewhat with a drop of 5.3 percent.
Private consumption fell 26.7 percent while investments tumbled by 47.1 percent. Government consumption grew 16.4 percent.
Sankar Chakraborti, group chief executive officer of Acuité Ratings & Research told NNA that a significant contraction in the June quarter was in the works as a result of the lockdown occupying a large part of the quarter. This created sharp economic disruptions both on supply and demand.
Of the 54 countries that had reported their GDP for the June quarter, only China and Vietnam recorded positive growth while India was among the weakest performers, according to rating agency CARE Ratings.
But Peru and Macau suffered more drastically than India, with much sharper contractions of 30.2 percent and 67.8 percent, respectively.
In a statement, Sangita Reddy, president of the Federation of Indian Chambers of Commerce and Industry, said the sharp plunge in GDP numbers was anticipated but the “magnitude of the contraction has indeed come as a surprise."
Giving a grim outlook for the remaining three quarters, CARE Ratings said GDP is expected to improve after the gradual reopening of activities but it would still be weighted down since there is no respite from the spread of the pandemic after the country entered the second quarter.
“Consumption demand and investments which are necessary to propel the economy would continue to be tepid and unlikely see a noteworthy improvement during the course of the year,” the agency warned.
India expanded reopenings on September 1 allowing subway trains to operate for the first time after several months of lockdown, despite having the fastest growing coronavirus caseload of any country in the world.