Under PM Modi, India's economy in recession first-time ever: Rahul Gandhi

Indian economy contracts for second quarter in a row

In terms of quarterly Gross Value Added, the NSO data showed a year-on-year contraction of 7 per cent from (-) 22.8 per cent in Q1FY21.

India's Gross Domestic Product (GDP) contracted 7.5% in the July-September period in comparison to the same period previous year, according to data released by the National Statistical Office on Friday.

The International Monetary Fund has meanwhile predicted that India's economy would contract by 10.3 percent this year, the biggest slump for any major emerging economy and the worst since independence.

India's economy had contracted by an unprecedented 23.9% in the first quarter (April-June) of this financial year, after being hit by the coronavirus pandemic and the subsequent economic slowdown. Analysts polled by news agencies Reuters and Bloomberg had forecast a contraction of 8.8 per cent and 8.2 per cent, respectively, for the second quarter. "In these circumstances, some other data sources such as GST, interactions with professional bodies etc. were also referred to for corroborative evidence and these were clearly limited", the release added.

Manufacturing grew by 0.6% in July-September after shrinking by a massive 39% in the preceding quarter, the report said.

"The resurgence of COVID cases in many geographies poses a risk to economic revival in the coming quarters", said Anagha Deodhar, economist at ICICI Securities, Mumbai.

He said because of the uncertainty due to a second wave of cases across the country, it will be hard to predict if economic growth reaches positive territory in October-December and January-March quarters.

During the July-September period, trade, hotels, transport and communication saw a dip of 15.6 per cent, whereas public administration, defence and other services declined 12.2 per cent.

The economy was already slowing before the pandemic struck, growing only 4.2 per cent in the last fiscal year, its slowest pace in 11 years.

Gross fixed capital formation was 29 per cent, nearly the same as July-September previous year. Though the restrictions have been gradually lifted, there has been an impact on the economic activities.

Sunil Sinha of India Ratings said if the current trends sustain then a faster recovery is possible. "Therefore, these are still early days, and we believe the data for few more months will have to be watched before we can be sure that we are on a sustained recovery path", he said.

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