India has officially entered a technical recession as the gross domestic product (GDP) contracted by 7.5 per cent in the July-September quarter.
The figures were an improvement on the record 23.9 per cent contraction recorded last quarter and are much better than economists’ forecasts of 8.8 per cent in a poll by news agency Reuters.
Annual growth of 3.4 per cent in the farm sector and 0.6 per cent in manufacturing raise hopes of an early recovery as the government gears up to distribute vaccines owing to the on-going Covid-19 crisis.
India’s economy still remains in the league of large economies that have contracted the most in the second quarter.
China is the only large economy that posted a growth in the September quarter at 4.9 per cent.
This indicates that Asia’s third-largest economy is in for a tough fight as it attempts to revive demand and create jobs even as coronavirus infections climb.
However, as some states re-imposed curbs this week to fight a second wave of infections, businesses fear the restrictions could slow the pace of recovery in the next two or three months, as well as heighten the risk of inflation.
RBI governor Shaktikanta Das has highlighted a stronger-than-expected recovery from the coronavirus-led lockdown, hinting at continued monetary policy support to revive the economy.
Congress leader Rahul Gandhi took a jibe at PM Narendra Modi and said: “Under PM Modi, India’s economy is officially in a recession for the first time ever. More importantly, 3 crore people are still looking for work under MNREGA. Economy cannot be ordered to grow by diktats. PM needs to first understand this basic idea.”
India’s economy had struggled to gain traction even before the pandemic, and the hit to global activity from the virus and one of the world’s strictest lockdowns combined to deal the country a severe blow.
The shutdown in the vast country of 1.3 billion people left huge numbers of people jobless almost overnight, including tens of millions of migrant workers in the shadow economy.