The country’s GDP contracted by 23.9 percent in the second quarter of the financial year of 2020 that started in April and ended in June. This marked the largest quarterly slip of the gross domestic product of the country. The fall in GDP is largely due to the outbreak of the COVID-19 pandemic which forced the government to put the country into a state of lockdown for several weeks. The closure of MSMEs and other businesses across the country affected the GDP largely and led to its drop. The data was released by the Ministry of Statistics and Programme Implementation on Monday.
From January to March quarter the GDP of the country was reported to grow at a pace of 3.1 percent which is the lowest growth rate of the Indian GDP in the last eight years.
During an official release Ministry of Statistics and Programme Implementation said, “GDP at constant (2011-12) prices in Q1 of 2020-21 is estimated at Rs 26.90 lakh crore, as against Rs 35.35 lakh crore in Q1 of 2019-20, showing a contraction of 23.9 percent as compared to 5.2 percent growth in Q1 2019-20.”
Many analysts had earlier predicted the contraction of India’s GDP due to the more than two months’ complete lockdown of the country to restrict the spread of coronavirus. Even now, several state governments are enforcing periodic lockdowns in their states regularly.
Although even before the spread of the disease (COVID-19) the country’s GDP had started to slow down. The last quarter of the 2019-20 financial year produced the slowest GDP growth rate. The growth rate in Q4 FY20 was at 3.1 percent and in FY20 GDP growth is 4.2 percent which is also weak.
Not only the country’s economy, but the economy of most of the world was also seen to slow down due to the spread of the virus. The third-largest economy of the Asia continent which marked an 8 percent growth in the same quarter of 2018 and 5.8 percent growth in the same quarter of the previous year slipped due to the slow down of trade, consumer demand, and sparse government spendings amidst global trade frictions.
The International Monetary Fund (IMF) has estimated the global contraction by 4.9 percent this year. The UK reported that their economy suffered a 21.7 percent year on year drop in the June quarter.
To return the GDP in its previous form, the central government rolled out several stimulus programs including ‘Atmanirbhar Bharat’ with an aim to build a self-reliable India.
Also, from March the Reserve Bank of India slashed the interest rate in 115 basis points and said that the country’s economy needs to be shielded from the disruptions caused by these pandemics.
It was also predicted by the bank that even in the second quarter of the fiscal year, the GDP will still go on to contract as the effect of the slowed-down businesses and economy would still be there.