India could be entering a deep recession as its GDP contracted by a record 23.9 percent from April to June, when the coronavirus lockdowns paralyzed business activities in the world’s fifth-largest economy.
The official data for the first quarter, released by the Ministry of Statistics and Program Implementation (MoSPI) on Monday, shows that the economy saw the first decline since India began publishing quarterly numbers in 1996. In the same period last year, the nation’s economy expanded 5.2 percent.
Strict government lockdowns in force for over two months to contain the spread of Covid-19 sent key sectors of the economy into freefall. The manufacturing, construction, and trade sectors fell 39.3 percent, 50.3 percent, and 47 percent respectively. Meanwhile, agriculture managed to beat the negative trend, growing 3.4 percent during the period.
The recent data signals that India could be on track for its first full-year contraction in more than four decades. At the same time, if India fails to improve its economic performance in the second quarter, which ends in September, the country will be in a technical recession – defined as two consecutive negative quarters. The data for the July-September period will be released in November.
As forecasts expected the GDP figures to be in negative territory, the drop was milder than some analysts predicted. While economists told Bloomberg and Reuters they expected a nearly 18-percent drop, gloomier outlooks warned that the contraction could be as deep as 25 percent.
However, some analysts say the economic slump might be underestimated, as the Covid-19 outbreak could have disrupted data collection.
“There is a very high probability that this data will undergo several revisions in the future. But broader trends are clearly visible,” Rupa Rege Nitsure, group chief economist for L&T Financial Holdings, Mumbai, told Reuters.
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