GDP falls 23.9% in first quarter
The Indian economy saw its worst contraction in decades, with Gross Domestic Product (GDP) shrinking by a record 23.9% in the April to June quarter in comparison to the same period last year, according to data released by the National Statistical Office.
- GDP at Constant (2011-12) Prices in Q1 of 2020-21 is estimated at Rs 26.90 lakh crore, as against Rs 35.35 lakh crore in Q1 of 2019-20, showing a contraction of 23.9 percent as compared to 5.2 percent growth in Q1 2019-20.
- GDP at Current Prices in the year Q1 2020-21 is estimated at ₹ 38.08 lakh crore, as against ₹ 49.18 lakh crore in Q1 2019-20, showing a contraction of 22.6 percent as compared to 8.1 percent growth in Q1 2019-20.
- Agriculture was the only sector which recorded a modest growth of 3.4% in year-on-year terms. All other sectors saw contraction, with the steepest fall of 50% in construction, and the trade, hotels, transport and communication services category shrinking 47%.
- The contraction reflects the severe impact of the COVID-19 lockdown, which halted most economic activities, as well as the slowdown trend of the economy even pre-COVID-19.
- Economists expect this to contribute to a contraction in annual GDP this year, which may be the worst in the history of independent India.
- “The Indian economy is in a deeply vicious cycle, where demand is contracting so heavily, while the capacity to neutralise this contraction has also contracted equally because of the tax revenue contraction. Therefore, I don’t see GDP returning to positive territory for six quarters until the second quarter of next year,” said D.K. Srivastava, chief policy advisor at EY India, and a member of the Advisory Council to the 15th Finance Commission.
- He expects annual GDP to contract 5%-7% in 2020-21, noting that the last contraction of the economy occurred in 1979-80, when GDP shrank 5.2%. There have been four other instances of minor contraction between 1965-68, and 1972-73, but this year is likely to be the worst since Independence, said Dr. Srivastava.