Pandemic shocker! India’s GDP shrinks by 23.9% in first quarter of FY2020-21

Hit by the Covid-19 pandemic, India's Gross Domestic Product (GDP) has shrunk by 23.9 per cent in the first quarter of the financial year 2020-21.

"GDP has shrunk from Rs 35.35 lakh crore in Q1 of 2019-20 to Rs 26.90 lakh crore in the first quarter of Q1 of 2020-21, showing a contraction of 23.9 per cent as compared to 5.2 per cent growth in Q1 2019-20," an official statement by the National Statistical Office (NSO) said on Monday.

In the corresponding quarter in the last financial year, the Indian economy had registered grown at a rate of 5 per cent. In the previous quarter, Q4 FY2019-20, India's GDP growth rate was 3.1 per cent.

The worst-hit sector in the first quarter of FY2020-21 was construction, which contracted by 50 per cent. The hotel industry contracted by 47 per cent, manufacturing by 39.3 per cent and mining by 23.3 per cent.

The only sector which managed to survive the slump was agriculture, which registered a growth of 3.4 per cent.

Covid-19 impact

The GDP growth data accounts for the months of April, May and June - when a strict national lockdown was in place in the country due to the coronavirus pandemic.

The nationwide lockdown was announced by Prime Minister Narendra Modi on March 24, 2020 for 21 days, which was followed by another for 19 days.

The economy is believed to have suffered the most during the June quarter as a result of the nationwide lockdown.

India, which had one of the strictest Covid-19 lockdowns, also seems to have suffered the one the worst economic consequences. India's economic slump for the lockdown quarter is worse than the majority of the big global economies.

The UK's economy contracted by 20.4 per cent in Q1, while the Chinese economy grew by 3.2 per cent.

Worst financial slump since 1996

The year-on-year GDP contraction during the June quarter (Q1FY21) is India's worst growth performance since the country started reporting quarterly GDP data in 1996.

However, it is not unexpected. India Today TV analysis of predictions given by economists had indicated that the GDP growth will shrink by 15 per cent to 25 per cent.

Industry body FICCI's latest Economic Outlook Survey had pegged India's growth in first quarter of 2020-21 at -14.2 per cent and growth for overall financial year 2020-21 at -4.5 per cent.

Soumya Kanti Ghosh, Group Chief Economic Adviser at the State Bank of India had said that India's real GDP growth for Q1 FY21 would now be around -16.5 per cent.

State Bank of India expected India's GDP to contract 16.5 per cent in the April-June quarter from the earlier expected 20 per cent. In its earlier Ecowrap report in May, SBI had estimated Q1 FY21 GDP contraction at over 20 per cent.

Abheek Barua, Chief Economist at HDFC Bank, expected GDP growth to contract 21 per cent in June quarter compared to a growth of 3.1 per cent in the March quarter.