Economy

India's GDP shrinks by nearly one-fourth

From lockdown period, South Asian economic powerhouse only sees positive growth in agricultural sector with 3.4%

Shuriah Niazi and Ahmad Adil   | 31.08.2020
India's GDP shrinks by nearly one-fourth

NEW DELHI 

India's economy contracted by nearly a quarter from April to June, when the country went into complete lockdown to curb the spread of the novel coronavirus, according to official figures released Monday. 

According to the Statistics and Programme Implementation Ministry, the country's gross domestic product (GDP) shrank a record 23.9% in comparison to last year.

The ministry's National Statistical Office released the data for the first quarter, which starts on April 1 and ends on June 30, of the 2020-21 fiscal year. 

India's construction sector contracted 50.3% from last year, while the manufacturing sector registered a fall of 39.3% from growth of 3% last year. The trade, hotel, and transport sector shrank 47%, according to the data.

Agriculture is the only sector that saw growth -- 3.4% -- in the first quarter from 3% last year, said the data, with the government noting in a statement that it had introduced restrictions on "economic activities not deemed essential" and movement to contain the pandemic as of March 25, 2020.

"Though the restrictions have been gradually lifted, there has been an impact on the economic activities as well as on the data collection mechanisms. The timelines for filing statutory returns were also extended by most regulatory bodies."

Fears confirmed

Economic experts say the economic shrinkage figures served to confirm fears about the country's economy.

Rajrishi Singhal, a policy consultant, told Anadolu Agency that the nearly minus 24% contraction was "little more than consensus estimates and personal estimates." 

"We knew that the economy is in bad shape. Today's data confirmed our doubts and fears. Some of us had guessed it," said Singhal, who is also a former editor with leading business newspapers in India.

He underlined that private final consumption expenditures and fixed capital formation were the major contributors to the drop in GDP. 

"The government now has two clear tasks. Firstly, consumption demand needs to be revived. Second is to incentivize the fixed capital formation or investment in the economy."

For her part, Halima Sadia Rizvi, who heads the Economics Department at Jamia Millia Islamia University in the capital New Delhi, warned that it current conditions continue, the country's economy could further deteriorate.

"The measures which are being taken are not giving proper signals to people. Common people and businessmen have a trust deficit with the government. The measures and policies that the government are taking – people are not taking them in the spirit in which they are given," Rizvi said. 

"The policy may be in one direction, the actual implementation is in a totally opposite direction, which is also deterring business activity. So, if this thing continues for some more time, god forbid if the economy reaches a difficult situation, it may take a few years to improve again."

India's already-battered economy took a fresh hit with the pandemic and the related economic fallout.

According to the Centre for Monitoring Indian Economy (CMIE) think tank, salaried jobs were affected the most during the current virus-induced lockdown.


'Chance to improve'

Calling into question the accuracy of the data collected, Singhal said there was a chance of improvement in coming period.

"There is a question mark over the data because obviously the collection of data and surveys have not been completely possible because of the pandemic and lockdown." 

"In my opinion, the GDP contracted by 23.9% but my guess is that perhaps it hasn't contracted by so much," he said, adding that once more data became available, there would be more clarity. 

"Maybe, there is a chance that it could improve also because there was an improvement or slow revival in economic activities from June onwards."


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