The services sector, which accounts for 55 per cent of GDP, was among the hardest hit in a nationwide lockdown
imposed since March 25 to contain the coronavirus
pandemic. Trade, hotels and transport grew 2.6 per cent in the January-March quarter from a year ago, while financial services expanded 2.4 per cent.
“Crawling out of this malaise caused by this health crisis (coronavirus) will require a lot more hard work,” Indranil Pan, chief economist at IDFC First Bank, told CNBC-TV18.
The growth numbers were broadly in line with estimates by brokerages and economists, who have seen the economy headed for a recession in FY21. The government is working on a new set of guidelines for the lockdown
to be issued this weekend.
The first Advance Estimates, released in January for Budget preparations, pegged the economic growth
rate at 5 per cent in 2019-20. The second Advance Estimates, released on February 28, also projected the FY20 growth rate at 5 per cent, though there were changes in growth in various segments within overall economy and in various quarters compared to that in the first Advance Estimates.
Home Minister Amit Shah met with Prime Minister Narendra Modi on Friday to discuss the lockdown, which is due to end on Sunday. Media reports said Shah, who spoke to chief ministers on Thursday, discussed how to restart economic activity amid a steady increase in coronavirus
The full impact of the lockdown
on manufacturing and services will become more apparent in the June quarter, with Goldman Sachs predicting a 45 per cent contraction from a year ago.
Weather forecasts for normal monsoon rains are in farmers' favour at least, giving hope that the rural sector can help support the millions of migrant workers who returned to their villages from the cities when the lockdown began.
Number of coronavirus affected people in India has crossed 165,799 with 4,706 deaths, with an average daily jump of 6,000 cases in the last one week.
Unlike some advanced economies, India's Rs 21 trillion stimulus package has largely focussed on subsidised credit to small businesses and farmers, while direct fiscal stimulus was limited to around 1 per cent of the GDP, economists said.
The Reserve Bank of India cut policy rates by 40 basis points earlier this month, and has reduced its key repo rate by 115 basis points since February.