India’s GDP contracts by 7.3% for 2020-21 financial year; grows by 1.6% in Jan-Mar quarter

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India’s Gross Domestic Product (GDP) for the fourth quarter (January to March) grew by 1.6%, but contracted by 7.3% for the full 2020-21 financial year, government data showed on Monday, after being severely hit by lockdowns triggered by the Covid-19 pandemic that ground all economic activity.

The annual contraction was the worst in more than four decades.

The Indian economy may have expanded during the January-March period before being tamed by a brutal second wave of the Covid-19 pandemic, but it was also the 11th straight quarter of slowdown. The emergence of the second wave in Maharashtra may have hurt growth in March, as the state had imposed restrictions on mobility in several districts of the industrial state.

This contraction is much better than the forecasts of the Reserve Bank of India and the Ministry of Statistics and Programme Implementation, both of which had expected GDP for the full year to contract by 8 percent. Other analysts had estimated the contraction between 7-8 percent.

Agriculture was once again the primary driver of growth tough manufacturing, construction and services sectors also showed improvement quarter-on-quarter.

The Indian economy had contracted 24.4% in the first quarter of 2020-21 due to a harsh lockdown that exempted only manufacturing of essential goods and provision of essential services. A gradual easing of the lockdown began on June 8 but many service sector industries were ordered to stay shut.

The April-June 2020 contraction was the deepest among the G20 nations. The easing of the lockdown together with the monetary and liquidity easing and fiscal measures limited the contraction to 7.3% in the second quarter but India fell into a technical recession due to two consecutive quarters of contraction, the report said.

A tiny 0.4% expansion in the third quarter (October-December) was seen when restaurants were allowed to start dine-in services and shopping centres buzzed with festival and wedding season shoppers, helping the economy come out of the technical recession.

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