India's gross domestic product or GDP contracted 7.5 percent in the July-September period in comparison to the same period last year, according to data released by the National Statistical Office on Friday.
The GDP had expanded by 4.4 percent in the corresponding July-September period of 2019-20. The economy had shrunk by an unprecedented 23.9 percent in the first quarter of this fiscal due to the coronavirus pandemic and pandemic-induced lockdowns.
Manufacturing clocked a surprise 0.6 percent growth in July-September after it had shrunk by a massive 39 percent in the preceding quarter.
Continuing its good showing, the agriculture sector grew by 3.4 percent, while the trade and services sector showed lower-than-expected contraction at 15.6 percent. Public spending was down 12 percent.
The GDP contraction of 7.5 percent in July-September compares with a growth of 4.4 percent in the same quarter last year. China's economy grew by 4.9 percent in July-September this year, faster than the 3.2 percent growth in April-June 2020.
Though the contraction in July-September pushed India into its first technical recession, based on records going back to 1996, a sharp recovery held out hopes for the economy turning around before the end of the fiscal year. Reserve Bank of India (RBI) Governor Shaktikanta Das had on Thursday stated that the recovery from the lockdown has been stronger than expected and the economy could show growth in the fourth quarter.
The improvement in the economy came ahead of next week's interest rate decision by the RBI and coincides with a drop in India's daily virus cases, which have tapered off to half of its peak of more than 97,000 infections a day in mid-September.
Rating agency Icra had said the Year-on-Year (YoY) contraction in Indian GDP (at constant 2011-12 prices) is estimated to have narrowed appreciably to 9.5 percent in Q2 FY2021 from 23.9 percent in Q1 FY2021, as the economy recovered from the lows of the pandemic-induced lockdown.
It said the contraction in the Gross Value Added (GVA) at basic prices is expected to have moderated considerably to 8.5 percent in the July-September quarter from 22.8 percent in the previous three months.
The RBI has estimated that the economy will contract by 9.5 percent for the full fiscal year.
"India has entered a technical recession in the first half of 2020-21 for the first time in its history with Q2 2020-21 likely to record the second successive quarter of GDP contraction," as per the article titled 'Economic Activity Index', authored by Pankaj Kumar of the Monetary Policy Department.
It, however, added that the contraction is "ebbing with gradual normalisation in activities and expected to be short-lived."
The index is constructed from 27 monthly indicators using a dynamic factor model and suggests that the economy rebounded sharply from May/June 2020 with the reopening of the economy, with industry normalising faster than contact-intensive service sectors, it said.
(Edited by : Jomy)
First Published: IST