India's gross domestic product contracted a record 23.9% in its 2020-2021 first fiscal quarter between April and June making it the worst three months since India gained independence in 1947.
The significant economic damage and the effect of lockdowns as a result of the COVID-19 pandemic is to blame for this loss in growth. Economists polled by Bloomberg expected GDP to have fallen 18% only in the first quarter.
The contraction was large and broad-based with the notable exception of agriculture, the National Statistical Office said. Unprecedented losses in growth hit services, manufacturing and trade while private consumption and capital formation took big hits, too.
Manufacturing shrank 39.3 percent while construction fell 50.3 percent. Investment declined 47 percent year on year while household consumption contracted by almost 27 percent. A 16 percent jump in government consumption failed to offset the sharp decline in other sectors.
The first-quarter numbers are in contrast to the last quarter of the 2019-2020 fiscal year when the economy grew by 3.1 percent. India's economy grew by 5.1 percent in the first quarter of 2019-2020. India's GDP for the full year 2020-2021 is now expected to contract by at least 5% as a predicted economic upturn after the second and third quarters kicks in.
The second quarter should be the low point for India's economy, according to Shilan Shah of Capital Economics. He said there were signs the recovery might be very slow despite the easing of lockdowns.
"The continued rapid spread of the coronavirus will dampen domestic demand," Shah said. "What's more, the underwhelming fiscal response to the crisis will guarantee a legacy of higher unemployment, firm failures and an impaired banking sector that will weigh heavily on investment and consumption."
Things stand to get worse for India in the second quarter as the COVID-19 pandemic is setting unwanted records. On Monday, India reported four straight days in which new daily COVID-19 cases exceeded 75,000. The peak was Sunday when India reported 78,761 new cases in 24 hours - surpassing the previous high of 77,299 posted by the U.S. on July 17.
"It is the largest one-day surge in cases worldwide and the reason behind this: because the pandemic is spreading in rural areas," cardiologist Dr. Manoj Kumar said.
The increase pushed India's total confirmed cases to more than 3.5 million - the third highest worldwide after the U.S. with 6.0 million and Brazil with 3.8 million. India has reported 62,000 deaths from the disease - the world's third highest. It is seeing some 1,000 COVID-19 deaths daily.
India's public health experts say the country now has the fastest-growing daily coronavirus caseload of any country.
