FPJ Fast Fact: What does 23.9% contraction actually mean? How bad is it?

FPJ Fast Fact: What does 23.9% contraction actually mean? How bad is it?

FPJ Web DeskUpdated: Tuesday, September 01, 2020, 12:38 PM IST
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The COVID-19-induced lockdown had brought the whole Indian economy to a grinding halt except for a few sectors. So, the impact of this on the GDP had to be equally bad. As per the National Statistical Office (NSO) data, India's economy suffered its worst slump on record in April-June, with the gross domestic product (GDP) contracting by 23.9 per cent.

According to the data released by the National Statistical Office (NSO), "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. percent as compared to 5.2 percent growth in Q1 2019-20."

Understand which sectors are in a negative growth trajectory and which ones are in positive; and how future looks:


- While the non-agriculture sector nosedived this COVID-19 times, the agriculture sector recorded a growth of 3.4 per cent in April-June 2020 over the 3 per cent growth in April-June 2019. The agricultural sector was the only silver lining in this rather gloomy economy. This is not the case with some other economies.

- The services sector contracted by 20.6 per cent in April-June 2020 against the 5.5 per cent growth in April-June 2020.

- As per the data, the construction sector shrunk by -50.3 per cent, whereas trade, hotels, transport, communication and services related to broadcasting contracted by 47 per cent.

- The manufacturing sector; and mining and quarrying shrunk by 39.3 per cent and 23.3 per cent respectively.

- Utility services like electricity, gas, water supply and others contracted by 7 per cent.

- This degrowth was attributed to lockdown and also due to shortage of labourers (effect of lockdown).

- While the sector contracted, there was also a drop in consumption. It is estimated that private consumption witnessed a negative growth of -24.5 per cent in quarter 2020-21. However, government consumption witnessed an increase of 20.2 per cent in Q1 2020-21 versus the 9.5 per cent growth in Q1 2019-20. Investment growth witnessed a sharp contraction of 47.9 per cent in Q1 2020-21.

- The next quarter also India will witness double-digit degrowth.

- According to Care Rating, the higher growth in the agriculture sector and consequently rural demand would support the domestic economy.

- Care Ratings has projected the country’s GDP to contract by around 6.4-6.5 per cent in FY21.

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