The economy was pushed to a record contraction in the June quarter on account of COVID-19 restrictions.
India’s gross domestic product or GDP is widely expected to have shrunk in the July-September period, but at a milder pace compared to the previous quarter, as business and economic activities pick up after months of coronavirus-caused slowdown. Official data due at 5:30 pm today will likely show the economy entered its first technical recession — which is two consecutive quarters of contraction in GDP — since 1996, when the country began quarterly records. Still, economists are optimistic the slump in the second quarter of current financial year will not be as harsh as the record 23.9 per cent crash in the April-June period.
Here are 10 things to know about the country’s GDP:
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Economists expect the country’s GDP to contract 8.8 per cent in the quarter ended September 30, according to a poll by news agency Reuters. They also predict a contraction of 3 per cent in the December quarter, followed by expansion of 0.5 per cent in the final January-March period of financial year 2020-21.
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Still, the economy is on track to register an overall contraction of 8.7 per cent over the full year, which, if happens, would be its worst performance in more than four decades. Meanwhile, COVID-19-related restrictions have caused thousands of job losses and forced the majority of workforce to stay indoors — a big blow to an already-slowing economy.
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It is expected to recover early next year on hopes of better consumer demand fed by progress on coronavirus vaccines, say economists, who have marginally raised forecasts following a pickup in consumer demand for automobiles, non-durables and rail freight during the festival season.
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There has been a drop in the country’s daily coronavirus cases, which have tapered off to half of its peak of more than 97,000 infections a day in mid-September. COVID-19 infections in the country have crossed 9.27 million to stand as the world’s second highest after the US.
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As some states re-imposed curbs this week to fight a second wave of infections, businesses feared the restrictions could slow the pace of recovery in the next two or three months, as well as heightening the risk of inflation.
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Many economists expect the economy to return to expansion mode as soon as in the December quarter, as the pickup sustains. Optimism on a rebound in economy is backed by improving car sales and services sector performance, as the country continues to gradually remove restrictions to curb infections.
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The economy was pushed to a record contraction in the June quarter, following months of low demand and business activity much before the COVID-19 outbreak.
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Recently, the government announced more stimulus under its Atmanirbhar Bharat series of announcements. Under Atmanirbhar Bharat 3.0, Finance Minister Nirmala Sitharaman listed measures worth Rs 2.65 lakh crore with a focus on job creation and sectors such as real estate, taking the total monetary and fiscal aid in the country’s battle against COVID-19 to Rs 29.88 lakh crore or 15 per cent of its GDP.
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On Thursday, RBI Governor Shaktikanta Das highlighted a stronger-than-expected recovery from the coronavirus-led lockdown, hinting at continued monetary policy support to revive the economy. Remarks from the RBI chief in his address at an even come days ahead of the central bank’s scheduled bi-monthly policy review.
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The RBI has been doing the heavy lifting on providing stimulus to the economy, having lowered the key benchmark rates by a total 115 basis points (1.15 percentage point) so far this calendar year. The central bank has infused liquidity and transferred crores of rupees in dividend to the government, despite inflation remaining well beyond its comfort level of 2-6 per cent.
