India's GDP contracts 23.9 pct in Q1FY21; Sharpest decline since 1996

India's first-quarter financial year 2020-21 (Q1FY21) Gross Domestic Product (GDP) contracted by a massive 23.9 per cent year-on-year (YoY) basis. It is the highest ever contraction on record as lockdowns due to COVID-19 pandemic halted almost all the economic activities across the nation.

As per the National Statistical Office (NSO), gross value added (GVA) came in at -22.8 per cent. This is the sharpest contraction since India started publishing quarterly figures in 1996. The data released by the National Statistical Office said that farm sector was the only sector that performed positively amid favourable monsoon, improved availability of water in reservoirs and large procurement of food grains among others, Farm sector grew at 3.4 per cent in the June quarter.

National Statistical Office's data showed important sectors that have a huge contribution to the GDP like manufacturing, construction and trade sectors saw massive contraction.

Sector-wise GDP Data

Agriculture: It grew at 3.4 per cent in Q1FY21 as against 3 per cent posted last year.

Mining: In Q1FY21 mining contracted by 23.3 per cent versus 4.7 per cent posted in the same quarter last year.

Manufacturing: In Q1FY21 manufacturing growth dropped 39.3 per cent against 3 per cent growth posted last year.

Construction: Its growth fell 50.2 per cent as against 5.2 per cent posted last year.

Gross Fixed Capital Formation: It was down 47 per cent in the quarter.

Trade sectors: It contracted 47 per cent in Q1FUY21.

Government final consumption Expenditure: It was up 16 per cent in the quarter on a year-on-year basis.

Government expenditure, which is represented by the public administration services has contracted 10.3 per cent. Private Final Consumption Expenditure (PFCE), the realistic proxy to gauge household spending, for Q1FY21 fell 54.3 per cent compared to a 56.4 per cent growth posted in the corresponding quarter of the last financial year (FY20). Once the world's fastest-growing major economy, India is now on track for its first full-year contraction in more than four decades. While there are early signs that activity began picking up this quarter as lockdown restrictions were eased, the recovery is uncertain as India is quickly becoming the global epicentre for virus infections.

India's economy had expanded by 3.1 per cent in the March quarter and dragged FY20 GDP growth to 4.2 per cent, the weakest since the global financial crisis. The economy had grown at 6.1 per cent in FY19. The weak demand in almost every segment and job losses gives a sense that similar contraction would be seen in the July-September quarter (Q2FY21). Another contraction will officially take India into a recession, which is defined as a period when economic activities contract for two quarters in a row (or six months).