1. GDP falls 23.9% in first quarter
Worst contraction seen in decades
- 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 on Monday.
- 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.
- 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%.
Gross Domestic Product (GDP) is the single standard indicator used across the globe to indicate the health of a nation’s economy. It is the sum of private consumption, gross investment in the economy, government investment, government spending and net foreign trade (difference between exports and imports).
Gross Value Added (GVA) provides for value of the amount of goods and services that have been produced in a country, minus the cost of all inputs and raw materials that are directly attributable to that production. It is used to measure the output or contribution of a particular sector.