GDP contracts by 23.9%, biggest fall in 40 yrs

| | New Delhi
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GDP contracts by 23.9%, biggest fall in 40 yrs

Tuesday, 01 September 2020 | PNS | New Delhi

Sensex tanks 1,615 points from day’s high, closes at 839 points lower

In a virtual freefall, India’s GDP collapsed 23.9 per cent in the April-June quarter year-on-year, the biggest shrinkage in 40 years, as the coronavirus lockdowns battered an already slowing economy. Most rating agencies and RBI had projected a sharp contraction in India’s GDP for the first quarter of 2020-21.

Even before the coronavirus outbreak, India’s GDP started to shrink. The GDP had grown at 3.1 per cent in the January-March quarter, which was the slowest growth in at least eight years.

Ahead of GDP data, the fresh clash at LAC with China spooked the market, which was also apprehensive about a poor growth data.

The news of Chinese aggression turned the sentiments negative and BSE flagship Sensex plunged over 1,615 points from its day’s high. At close, the index ended down 839 points for the day to 38,628. Nifty closed 260 points to 11,387.

Agriculture was the only outlier as all other sectors, including manufacturing, construction and services, suffered steep declines.

India’s economy had grown by 5.2 per cent in the same quarter of last fiscal, as per the data released by the National Statistical Office (NSO).

The Government had imposed a nationwide lockdown from March 25, 2020 to curb the spread of Covid-19 infections which adversely impacted all sectors of the economy.

According to the data, gross value added (GVA) growth in the manufacturing sector contracted by 39.3 per cent in the first quarter of 2020-21, from 3 per cent expansion a year ago.

However, farm sector GVA grew at 3.4 per cent, compared to 3 per cent in the corresponding period of 2019-20.

Construction sector GVA contracted by a whopping 50.3 per cent from 5.2 per cent expansion earlier. Mining sector output declined at 23.3 per cent, as against a growth of 4.7 per cent a year ago.

Electricity, gas, water supply and other utility services segment too shrank by 7 per cent in the first quarter of 2020-21, against 8.8 per cent growth a year ago.

Similarly, trade, hotel, transport, communication and services related to broadcasting declined 47 per cent in the first quarter from 3.5 per cent growth earlier.

Financial, real estate and professional services fell by 5.3 per cent in Q1 FY21 from 6 per cent growth in same period last fiscal.

Public administration, defence and other services too saw a decline of 10.3 per cent during the quarter under review, from 7.7 per cent growth a year earlier.

“GDP at Constant (2011-12) Prices in Q1 of 2020-21 is estimated at Rs 26.90 lakh crore, as against Rs 35.35 lakh crore in Q1 of 2019-20, showing a contraction of 23.9 percent as compared to 5.2 percent growth in Q1 2019-20,” the NSO said in a statement.

“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 as well as on the data collection mechanisms,” it added.

It also said the timelines for filing statutory returns were extended by most regulatory bodies.

“In these circumstances, the usual data sources were substituted by alternatives like GST, interactions with professional bodies etc. and which were clearly limited,” it said.

The Centre began easing the lockdown for certain economic activities from April 20 onwards.

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