Economics Prelims cum Mains

GDP collapses 23.9% in Q1, worst among big economies

In News

  • India’s economy posted its steepest contraction on record in the April-June quarter of the current fiscal year.

News Summary

  • As per the provisional estimates by the Ministry of Statistics and Programme Implementation (National Statistical Office), GDP in April-June of 2020-21 slumped to 23.9%.
    • The GDP growth of (-23.9%) means that the total value of goods and services produced in India in April, May and June this year is 24% less than the total value of goods and services produced in India in the same three months last year.
  • Q4 of 2019-2020 or Previous Quarter
    • There was a growth of 1% in the previous (Jan-Mar) quarter.
  • Q1 of 2019-2020
    • These are The GDP had expanded by 5.2 per cent in the corresponding quarter of 2019-20.
  • Lockdown Impact
    • This is in the backdrop of the strict lockdowns imposed to arrest the spread of Covid infection which stalled economic activity, shut out consumption and investment, and led to job and income losses.
  • Worst since Economic Liberalisation
    • The June quarter GDP data is the worst contraction in the recent historyof the Indian economy.
    • Following graph gives a snapshot of India’s GDP since economic liberalisation of 1990s.

Sector Wise Performance

  • All key sectors except agriculture, forestry and fishing witnessed contractions.
  • Agriculture, Forestry and Fishing Sector
    • It was the only bright spot among all the sectors and grew at 3.4%.
    • Agriculture sector has benefited from a robust monsoon.
    • April-June 2020 is the third straight quarter where the country’s farm sector output has grown at a higher rate than overall GDP in “real” terms.
    • But it also marks the fifth consecutive quarter of agricultural growth surpassing the growth of the economy as a whole in “nominal” terms, i.e. at current prices unadjusted for inflation.
    • The farm sector is still growing, but not enough to pull out the economy that has entered recession mode since the lockdown-hit first quarter of this fiscal.
  • Manufacturing & Construction Sector
    • Recession deepened in the manufacturing sector as it posted four consecutive quarters of contraction.
    • The construction sector declined for the third quarter in a row.
    • Manufacturing and construction shrank 39.3% and 50.3% respectively during April-June.
  • Services Sector
    • Trade, hotels, transport and communications which are part of the services sector posted the second highest contraction of 47%.
    • As a whole, services, which accounts for nearly 60% of the economy, slumped 20.6% in April-June compared to 4.4% growth in the previous quarter.
    • Hotels, restaurants, hospitality and airlines, have borne the maximum brunt of the slowdown.

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