India’s economy has officially entered in a technical recession for the first time in history as the government on Friday announced that country’s Gross Domestic Product (GDP) for the second quarter contracted by 7.5 per cent.
This is the second time in the current fiscal year when country’s GDP has fallen. In the first quarter i.e. April-June quarter it contracted 23.9 per cent, the steepest fall ever.
The GDP had expanded by 4.4 per cent in the corresponding July-September period of 2019-20, according to data released by the National Statistical Office (NSO).
The economy had shrunk by an unprecedented 23.9 per cent in the first quarter of this fiscal due to the coronavirus pandemic and resultant lockdowns.
This trend underscores the reduction in purchasing power along with lower tax collection for the government, likely defaults on debt and falling Capex spends.
According to the NSO, the GDP at ‘Constant (2011-12) Prices’ in Q2FY21 is estimated at Rs 33.14 lakh crore as against Rs 35.84 lakh crore in Q2FY20, showing a contraction of 7.5 per cent as compared to 4.4 per cent growth in Q2FY21.
“Quarterly ‘GVA at Basic Prices at Constant (2011-12) Prices’ for Q2 of 2020-21 is estimated at Rs 30.49 lakh crore, as against Rs 32.78 lakh crore in Q2 of 2019-20, showing a contraction of 7 per cent,” the NSO said in the estimates of Q2FY21 GDP.
“With a view to contain the spread of the Covid-19 pandemic, restrictions were imposed on the economic activities not deemed essential during Q1. Though the restrictions have been gradually lifted, there has been an impact on the economic activities,” it added.
While the Indian economy continue to remain under pressure, China’s economy grew by 4.9 per cent in July-September this year, faster than the 3.2 per cent growth in April-June 2020.