1 December 2020, 11:12 AM

India’s Q2 GDP contracted lower than predicted before

India’s Q2 GDP contracted lower than predicted before

The Indian economy contracted 7.5% in the July-September quarter of FY 21. However, the contraction is much lower than that of the first quarter, where India's GDP fell 23.9% in the first ever economic decline. This de-growth in the second quarter now confirms that India has officially entered what is a 'technical recession'  in economic parlance to indicate that an economy has faced two successive quarters of decline.

India’s economic deceleration has continued despite improvement in macro fundamentals. Granted, but looking from a different angle the figure would suggest that India's economy has recovered significantly from the worst it faced in the previous quarter. Even otherwise, the rate of decline in GDP in the second quarter is lower than what most rating agencies and investment banks, including RBI predicted earlier.

And if all the sectors of the economy, except agriculture and farming, manufacturing and electricity, which grew at 3.4%, 0.6% and 4.4% respectively, posted a decline, the rate of deceleration has moderated substantially in Q2 compared to Q1.

The sector-wise performance shows an improvement over last quarter that captured the full effect of the nationwide lockdown. In the previous quarter, agriculture was the only sector that grew 3.4%. Construction declined over 50.3% and trade, hotels and transport over 47%. And now in Q2 the gross value added (GVA) of construction in the second quarter has contracted 8.6% while that of trade, hotels and transport has contracted 15.6%.