India's Gross Domestic Product (GDP) contracted during April - June by 23.9 percent in comparison with the sa*me period last year.
The country was under full national lockdown from the end of March until June in an attempt to curb and prevent the spread of Covid-19, bringing economic activities to a standstill.
According to government officials, this is the first de-growth witnessed in the country in the last 40 years. They also say the country will officially be in a recession if growth contraction continues in the next quarter (July – September) of the current financial year 2020-21 (April 2020 – March 21).
In an official statement, the Indian Ministry of Statistics and Programme Implementation stated on Monday: “GDP at Constant Prices in Quarter One (April – June ) of 2020-21 is estimated at $358.66 billion, as against $471.33 billion in the first quarter of 2019-20, showing a contraction of 23.9 percent.”
“With a view to contain spread of the Covid-19 pandemic, restrictions were imposed on the economic activities not deemed essential, as also on the movement of people from 25 March, 2020.”
“Though the restrictions have been gradually lifted, there has been an impact on the economic activities,” it added.
Prime Minister Narendra Modi declared a country-wide lockdown to curb the spread of Covid-19 pandemic from 25 March until June 1.
For the period of April-May, the economy remained at a complete standstill.
Even though the lockdown has been lifted in phases beginning in June, certain sectors and localised lockdowns are still in place and certain segments of the economy are not yet back to normal.
The sectors that have still not resumed activity are tourism, hospitality and retail.
Among the key indicators, cement, steel and commercial vehicles have shown a massive decline, according to data released on Monday.
Cement production has contracted by 38.3 percent, steel by 56.8 percent and commercial vehicles by 84.8 percent in April – June this year, over the same period last year.
According to data released by the government, manufacturing has witnessed a contraction of 40.7 percent.
Experts feel that the economy will take some time to recover.
Senior Economist at Kotak Institutional Equities, Suvodeep Rakshit, said: “Real GDP growth at (-) 23.9% in the first quarter of financial year 2020-21 was much lower than what markets were expecting. The trough in the economy was much lower than expected and the pickup will likely be more elongated.”
“The production side was pulled down by deep contraction in manufacturing, construction, and trade, hotel, transport sectors while the expenditure side was clearly pushed lower by heavy contraction both in consumption and investment,” he added.
“Going forward, given the gradual improvement in activity indicators (remaining well below pre-Covid levels) the growth recovery will be gradual and contracting for all quarters in the current financial years. Further, growth recovery will also be hinged to the curb of the Covid spread and removal of even localized lockdowns,” Rakshit said
Meanwhile, India’s principal opposition party Congress came down heavily against the Modi government over its handling of the economy.
After the government released the figures, former Indian finance minister and senior Congressman P. Chidambaram said in press conference: “It will take many months before the economy turns the corner and registers positive growth.”
Prime Minister Modi rolled out a $266 billion economic stimulus package on 12 May to help the economy amid the pandemic. India’s banking regulator Reserve Bank of India pumped in $127 billion to keep Indian financial markets stable.
Meanwhile, the federal Ministry of External Affairs said the Covid-19 lockdown was "necessary to prepare our health systems", adding that the economic crisis is a global phenomenon.
"Due to COVID-19 induced disruption, an even sharper trend of GDP growth decline has been seen in advanced economies like the USA (-31.7%) and Japan (-27.8%). The UK also recorded a GDP decline of (-) 20.4 percent," the ministry added.