This Article is From Nov 27, 2020

At -7.5%, GDP Rebounds But India Now In Technical Recession

Q2 GDP Data: Economists are optimistic the slump in the second quarter of current financial year will not be as harsh as the record 23.9 per cent crash in the April-June period.

Q2 GDP Data: Economists hope business activity has picked up after months of coronavirus-caused slowdown


  • India in first technical recession since start of quarterly data in 1996
  • July-September GDP reading much better than economists' forecast of 8.8%
  • Economy on track to register overall contraction of 8.7% in 2020-21
India's gross domestic product (GDP) contracted 7.5 per cent in the July-September period, as the economy rebounded from a record slump of 23.9 per cent in the previous quarter due to slowdown caused by the coronavirus pandemic. Friday's data confirms the economy's first technical recession - which is two consecutive quarters of GDP contraction - since 1996, when the country began quarterly records. The GDP reading for the second quarter of current financial year is much better than economists' forecasts of 8.8 per cent in a poll by news agency Reuters.

Here are 10 things to know about the country's GDP:

  1. Yet, the economy is on track to register an overall contraction of 8.7 per cent over the full year, which, if that were to happen, would be its worst performance in more than four decades.

  2. However, annual growth of 3.4 per cent in the farm sector and 0.6 per cent in manufacturing raised hopes of an early recovery as the government gears up to distribute coronavirus vaccines to a country with about 140 crore people. (Also Read: Agriculture, Manufacturing Buck Trend As GDP Contracts By 7.5%)

  3. The latest data brings hopes of a recovery following thousands of job losses, and the majority of workforce staying indoors, in the aftermath of COVID-19-related restrictions - a big blow to an already-slowing economy.

  4. "Till the pandemic does not go away, some of the sectors that are affected by social distancing will continue to experience demand slump," said Chief Economic Advisor Krishnamurthy Subramanian. "We should be cautiously optimistic," he said. 

  5. There has been a drop in the country's daily coronavirus cases, which have tapered off to half of its peak of more than 97,000 infections a day in mid-September. COVID-19 infections in India have crossed 9.27 million, making it the world's second most affected country after the US.

  6. As some states re-imposed curbs this week to fight a second wave of infections, businesses feared the restrictions could slow the pace of recovery in the next two or three months, as well as heighten the risk of inflation.

  7. Many economists expect the economy to return to expansion mode as early as in the December quarter, as the pickup sustains. They predict a contraction of 3 per cent in the December quarter, followed by an expansion of 0.5 per cent in the final January-March period of financial year 2020-21 on hopes of better consumer demand fuelled by progress on coronavirus vaccines.

  8. Recently, the government announced additional stimulus measures under its Atmanirbhar Bharat series of announcements. Under Atmanirbhar Bharat 3.0, Finance Minister Nirmala Sitharaman listed measures worth Rs 2.65 lakh crore with a focus on job creation and sectors such as real estate, taking the total monetary and fiscal aid in the country's battle against COVID-19 to Rs 29.88 lakh crore or 15 per cent of its GDP.

  9. On Thursday, RBI Governor Shaktikanta Das highlighted a stronger-than-expected recovery from the coronavirus-led lockdown, hinting at continued monetary policy support to revive the economy. The RBI chief's remarks in his address at an event come days ahead of the central bank's scheduled bi-monthly policy review.

  10. The RBI has been doing the heavy lifting on providing stimulus to the economy, having lowered the key benchmark rates by a total 115 basis points (1.15 percentage point) so far in this calendar year. The central bank has infused liquidity and transferred crores of rupees in dividend to the government, despite inflation remaining well beyond its comfort level of 2-6 per cent.

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