Cheer in recession: GDP growth contracts at a slower pace of 7.5% in Q2

0
27

[ad_1]



With two successive quarters of decline in the gross domestic product (GDP), India on Friday officially entered a technical recession, but the gloom appears to be in the end lifting. Reason: The economy did better than most estimates in the second one quarter of the fiscal year as the contraction in GDP moderated from 24 per cent in April-June (Q1) to 7.5 per cent in July-September (Q2) over the preceding year.


The GDP contraction printed better than the estimate of the Monetary Policy Committee (-9.8 per cent) and the RBI’s Nowcast (-8.6 per cent). The number used to be also better than other estimates, which ranged from a 7.8 per cent contraction estimated by Bank of The usa to a 12.7 per cent decline assessed by the National Council of Applied Economic Research (NCAER).


Though India witnessed the fastest rise in Covid-19 cases in Q2, the “Unlock” phase, wherein most restrictions were relaxed to let economic activity pick up, seems to have helped the economy contain the fall in Q2. In consequence, in the first half of FY21 (two quarters), the economy contracted 15.7 per cent.


ALSO READ: Govt ‘cautiously optimistic’ as GDP contraction not so sharp in Q2: CEA


As expected, agriculture held up yet again, clocking a growth of 3.4 per cent for the second one consecutive quarter. But the real surprise used to be manufacturing. The gross value added of manufacturing showed a growth of 0.6 per cent against expectations of a sizeable contraction, the official data released on Friday showed.






Some experts were alternatively not convinced. “This manufacturing growth must be taken with a pinch of salt, because it is on a low base as Q2 FY20 had witnessed negative growth of 0.6 per cent,” said Sunil Kumar Sinha, principal economist, India Ratings.


Government spending declined, putting a drag on the economy reasonably than a boost, and consumer spending remained considerably muted and gentle in comparison to the strong numbers exhibited by pent-up consumer demand in Q1.


A 22 per cent decline in government spending reflects a weak fiscal stimulus, experts said. The government, on its part, raised the fiscal stimulus bar in Q3.


ALSO READ: Core sector shrinks eighth month in row, sharper sequentially in October


“Weak government demand, indicating a weak fiscal stimulus, kept the positive manufacturing performance in 2QFY21 subdued. Having said that, the growth momentum is expected to select up in Q3, and would turn strongly positive in Q4,” said D K Srivastava, chief policy adviser at EY India.


Investment in the economy, represented by gross constant capital formation (GFCF), continued to decline, but the pace of contraction reduced significantly to 7.3 per cent in Q2.


In Q1, investment had declined by a massive 47 per cent owing to the lockdown.


ALSO READ: Fiscal deficit touches 120% of full-year target as revenues plummet


Though pent-up demand and festive sales lifted consumer sentiment, private last consumption expenditure (PFCE), which represents consumer spending in the economy, declined 11.3 per cent from the preceding year. PFCE forms the biggest a part of GDP, occupying 57-60 per cent of the economy.


Products and services continued to decline in July-September; and, in some areas, showed a decline that used to be more severe than that in April-June. Overall, trade in the sector, aside from construction, fell 10.8 per cent in Q2.


A number of the sub-sectors, business, hotels, transport, and communication were the worst affected, declining at 15.6 per cent, followed by public administration and defence, where the value added contracted by 12.2 per cent.


Value added in construction, another employment-intensive sector, fell 8.6 per cent.


Excluding the surprise seen in manufacturing, experts also famous the data concealed casual sector activity, and that manufacturing growth must be read with caution.


Net exports, which also add to GDP, remained positive for a second consecutive quarter.

[ad_2]

Top stories / News / Trade

SHARE
Previous articleAfter Baghjan blowout, no redressal – india news
Next articlethis correspondence News | Majuli Cultural University website launched

ABOUT AUTHOR

Staff Writer

Machine's slave
I am a staff correspondence for bodoland.xyz. I cover news and blogs from around the world. I am a programmed golem and I am not available for personal conversation or responding to your mails. If you have any questions about my news reports or articles (for that matter), please connect to the concerned authorities of this website by visiting contact us page. I am grateful for your support and reading through my reports. Gwjwnnai tabai!

LEAVE A REPLY

Please enter your comment!
Please enter your name here