India's GDP shrinks 23.9% in worst quarter on record
India's gross domestic product contracted 23.9% year-on-year from April to June when Asia's third-largest economy was shackled by one of the world's strictest lockdowns to contain the COVID-19 pandemic.
Economists had predicted a contraction of anywhere from 15% to 25% for the quarter, the first of the country's financial year.
The April-June GDP contraction, announced by the government on Monday, was the biggest slump on record since India started publishing quarterly data in 1996.
India's economy was already slowing before the pandemic struck. In the January-March quarter, GDP expanded by 3.1% year-on-year. For all of the previous fiscal year, the economy managed to grow at an average of 4.2%, its slowest pace in 11 years, dragged down by the manufacturing and construction sectors.
India's lock down - the world's largest, affecting 1.3 billion people - came into force on March 25. Restrictions have been eased to a great extent except for "containment zones," which are areas reporting large numbers of cases.
The country continues to witness massive numbers of new cases. As of Monday, India had confirmed over 3.6 million transmissions and 64,469 deaths. A day earlier it set a global record for new daily cases with 78,761.
However, India appears to be one of the few G-20 economies, along with China and Indonesia, expected "to post a strong enough pickup of real GDP in the second half of 2020 and full-year 2021 to end next year above pre-coronavirus levels," Moody's Investors Service said in its latest Global Macro Outlook.
Reacting to Monday's GDP data, professor N.R. Bhanumurthy of the National Institute of Public Finance and Policy told the Nikkei Asian Review: "This was purely on expected lines. What is more important is the way the agriculture is doing better at 3.4% [growth]. Otherwise, there's a decline across the board."
He expressed surprise at the 10.3% contraction in public administration, defense and other services "because the government sector is the one which was clearly supposed to be functioning during [the lockdown period]. Maybe a lot of capital expenditure-related items got postponed."
The Reserve Bank of India in an annual report released last week said the economic contraction may extend into the July-September quarter.
The "upticks that became visible in May and June after the lockdown was eased in several parts of the country appear to have lost strength in July and August, mainly due to reimposition or stricter imposition of lockdowns, suggesting that the contraction in economic activity will likely prolong into Q2 [the quarter ending in September]," the bank said.
In a July report, rating agency ICRA said it expected a GDP contraction of 9.5% for the whole of the current fiscal year owing to "localized" lockdowns and rising infection numbers. It was a sharp downward revision from its May forecast of a 5% contraction.