Covid-19 pain: India’s GDP contracts by record 23.9% in Q1

India' witnessed its steepest quarterly decline in gross domestic product as the country emerges to be the global hotspot for coronavirus infections.

GDP contracted 23.9% in the quarter to June from a year ago. This is the sharpest contraction since India started publishing quarterly figures in 1996.

India’s road to recovery appears a long and hard one. A mix of monetary and fiscal measures to prop up the economy have fallen short, leaving millions jobless and destitute, and businesses on the brink of bankruptcy.

Data released by National Statistical Office showed manufacturing, construction and trade sectors saw massive contraction at 39.3%, 50.3%, 47% respectively. Surprisingly, government expenditure as represented by the public administration services also contracted 10.3%.

As expected, the only silver lining in the data was performance of the farm sector which grew at 3.4% in the June quarter. Favourable monsoon, improved availability of water in reservoirs for irrigation, robust kharif sowing, large procurement of food grains and robust rabi production seems to have provided support to agriculture growth.

The novel coronavirus tally in India crossed 36 lakh on Monday with 78,512 new cases, while the number of recoveries surged to 27,74,801, pushing the recovery rate to 76.62 per cent, the Health Ministry said.

The death toll climbed to 64,469 with 971 more people succumbing to the infection in a span of 24 hours, according to the ministry data.

​Once the world’s fastest-growing major economy, India is now on track for its first full-year contraction in more than four decades. While there are early signs that activity began picking up this quarter as lockdown restrictions were eased, the recovery is uncertain as India is quickly becoming the global epicenter for virus infections.

“The dismal quarterly GDP print confirms the substantial cost that the harsh lockdown and lack of fiscal support inflicted on the economy,” said Priyanka Kishore, head of India and Southeast Asia economics at Oxford Economics Ltd. in Singapore. “While the start of the July-September quarter has likely benefited from a post-lockdown boost, those gains are already at risk of being lost amid the ongoing pandemic and New Delhi’s hesitance to open the fiscal taps.”