India's gross domestic product (GDP) contracted 23.9 per cent in the first quarter of financial year 2020-21, lowest in 24 years, according to the government data released on Monday. This is the worst quarterly GDP numbers ever recorded since India started compiling GDP data on quarterly basis in 1996. The number announced by the government is in consonance with market expectations considering the economic disruption caused by coronavirus pandemic and subsequent lockdown across the country, which began in the last week of March.
"GDP at Constant (2011-12) Prices in Q1 of 2020-21 is estimated at Rs 26.90 lakh crore, as against Rs 35.35 lakh crore in Q1 of 2019-20, showing a contraction of 23.9 percent as compared to 5.2 percent growth in Q1 2019-20," as per the data released by the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation.
The data showed manufacturing, construction and trade sectors reported massive slump of 39.3 per cent, 50.3 per cent, 47 per cent, respectively. The government expenditure, as represented by the public administration services, contracted by 10.3 per cent, while mining and electricity sector contracted by 23.3 per cent and 7 per cent, respectively.
Agriculture was the only sector that reported positive growth of 3.4 per cent on the back of good monsoon and robust kharif sowing and rabi production.
"Real GDP growth at minus 23.9 per cent in Q1 FY21 was much lower than what markets were expecting. The print indicates that the trough in the economy was much lower than expected and the pickup will likely be more elongated. Production side was pulled down by deep contraction in manufacturing, construction, and trade, hotel, transport sectors while the expenditure side was clearly pushed lower by heavy contraction both in consumption and investment," said Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities.
The NSO said that the GDP estimates are likely to undergo revisions due to challenges in collecting data of leading macro-economic indicators such as IIP and CPI.
Gross Value Added (GVA), a measure of the value of goods and services produced in a country, at basic price at constant (2011-12) prices stood at Rs 25.53 lakh crore in Q1 FY21, as against Rs 33.08 lakh crore in Q1 of FY20, showing a contraction of 22.8 per cent.
At current prices, the GDP was at Rs 38.08 lakh crore in Q1 FY21 compared to Rs 49.18 lakh crore in Q1 FY20, registering a contraction of 22.6 per cent as compared to 8.1 per cent growth in Q1 FY20. GVA at current prices stood at Rs 35.66 lakh crore during April-June quarter of current fiscal as compared to Rs 44.89 lakh crore in the year ago period, posting a contraction of 20.6 per cent.
Economists at State Bank of India (SBI) had predicted 16.5 per cent contraction in GDP in the first quarter, while CARE ratings had said the economy could shrink by 20.2 per cent. Similarly, Barclays was expecting the economy to contract by 25.5 per cent, while Goldman Sachs had warned that GDP might shrink about 45 per cent in the first quarter.
With a view to contain spread of the COVID-19 pandemic, restrictions were imposed on the economic activities not deemed essential, as also on the movement of people from 25 March, 2020. Though the restrictions have been gradually lifted, there has been an impact on the economic activities as well as on the data collection mechanisms, the NSO said.
The economy is set to enter a recessionary phase with some agencies even estimating contraction in subsequent quarters. The Reserve Bank of India (RBI)'s Monetary Policy Committee (MPC) has pegged GDP growth for the current year to be 'negative', without giving any ballpark estimates due to the unpredictability of the COVID-19 pandemic.
During the January-March quarter of the last fiscal, India's GDP grew at 3.1 per cent, lowest in 44 quarters, on account of the economic slowdown in pre-COVID-19 period. Overall growth for full financial year 2019-20 (FY20) slumped to 4.2 per cent - lowest since FY09 when GDP was 3.09 per cent - compared to 6.1 per cent in FY19.