GDP contracts 7.5% in second quarter
India’s Gross Domestic Product (GDP) contracted 7.5% in the second quarter of 2020-21, following the record 23.9% decline recorded in the first quarter.
- The country has now entered a technical recession with two successive quarters of negative growth.
- However, the economy’s performance between July and September when lockdown restrictions were eased is better than most rating agencies and analysts anticipated.
- While most estimated a contraction of around 10%, the Reserve Bank of India projected an 8.6% decline in the second quarter.
- Agriculture, which was the only sector to record growth between April and June this year, grew at the same pace of 3.4% in the second quarter, while manufacturing gross value-added (GVA) staged a sharp recovery to record 0.6% growth between July and September after collapsing 39.3% in the first quarter.
- Electricity, gas and other utility services saw 4.4% growth in the second quarter from a 7% contraction in Q1.
- But it remained bleak for several sectors, including mining, services such as retail trade and hotels, and construction.
- Should be cautiously optimistic as the economic impact is primarily due to the pandemic and the sustainability of the recovery depends critically on the spread of the pandemic.