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Tuesday, 01 September, 2020, 10 : 40 AM [IST]

With GDP’s sharpest decline of 23.9%, India expects V-shaped recovery after unlocking: CEA

The Indian economy on Monday posted a record contraction among major economies last quarter. The gross domestic product (GDP) shrank 23.9% in the April-June 2021 quarter from a year earlier, showed official data released by the Ministry of Statistics and Programme Implementation. This was the sharpest decline since the nation started publishing quarterly figures in 1996.

India reported more than 78,000 new infections on Sunday, the most by any country, with total cases nearing 4 million. The coronavirus outbreak and the lockdown have severely affected the economic activities in the country. Though the coronavirus-related restrictions have been gradually lifted, there has been an impact on the economic activities as well as on the data collection mechanisms, said the official data release.

The GDP Print is on expected lines, decline expected due to lockdown, said Chief Economic Adviser Krishnamurthy Subramanian.

"20%+ contraction is expected when the country was under severe lockdown for better part of the quarter. This is expected to be the scenario through out this FY," said Divakar Vijayasarathy, Founder and Managing Partner, DVS Advisors LLP.

Commenting on the recovery, Subramanian added "India is expecting a v-shaped recovery after unlocking of activities has been announced, and core sector output reflects that recovery."

"The extent of contraction for the financial year would depend upon how well the unlock is managed and the success of the vaccines," said Vijayasarathy.

"As represented by the increasing tractor sales, agricultural sector stands out as the only key sector to have registered growth. The recovery would be powered by the revival of the Agro sector and the measures announced by the government if implemented well, could ensure that," he further added.

"Comparing the numbers with that of other countries would not make any practical sense, since the lockdown was more severe here and the necessity of such lockdown is debatable," Vijayasarathy added.

"Given the limited fiscal space and the need to stimulate a more durable growth, the growth recovery will be gradual and is likely to continue into 1H FY22," said Suvodeep Rakshit, Senior Economist at Kotak Institutional Equities, Mumbai.

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