Indian economy claws back faster than expected in Q2; contraction at 7.5%

The GDP contraction of 7.5 per cent in July-September compares with a growth of 4.4 per cent in the same quarter last year

India's economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent and held out hopes for further improvement on better consumer demand.

The gross domestic product (GDP) had contracted by a record 23.9 per cent in the first quarter of the 2020-21 fiscal (April 2020 to March 2021) as the coronavirus lockdown pummelled economic activity.

With the gradual opening up from June, the economy has picked up, according to official data released on Friday.

Manufacturing clocked a surprise 0.6 per cent growth in July-September after it had shrunk by a massive 39 per cent in the preceding quarter.

Continuing its good showing, the agriculture sector grew by 3.4 per cent, while the trade and services sector showed lower-than-expected contraction at 15.6 per cent.

Public spending was down 12 per cent.

The GDP contraction of 7.5 per cent in July-September compares with a growth of 4.4 per cent in the same quarter last year.

China's economy grew by 4.9 per cent in July-September this year, faster than the 3.2 per cent growth in April-June 2020.

Though the contraction in July-September pushed India into its first technical recession, based on records going back to 1996, a sharp recovery held out hopes for the economy turning around before the end of the fiscal year.

Reserve Bank of India (RBI) Governor Shaktikanta Das had on Thursday stated that the recovery from the lockdown has been stronger than expected and the economy could show growth in the fourth quarter.

The improvement in the economy came ahead of next week's interest rate decision by the RBI and coincides with a drop in India's daily virus cases, which have tapered off to half of its peak of more than 97,000 infections a day in mid-September.



Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel