India’s GDP dramatically collapsed during the lockdown quarter and contracted by 23.9 per cent on-year in April-June, as was widely expected. The fall in India’s GDP in fiscal first quarter was greater than expected. A Bloomberg poll of economists had pegged a 19.2% on-year fall in India’s GDP in Q1. The coronavirus pandemic had led to an unprecedented shut down of shops, markets, industries, and almost all the wheels of the economy in April and May. It was only in the month of June that the green shoots of revival started to appear when the lockdown restrictions were eased. The GDP data released today has shown a clear picture of the depth of India’s economic crisis. It is for the first time in the last 40 years that India’s GDP has seen a contraction.
The pandemic deepened India’s economic pain, adding to the prolonged slowdown going on for the last two financial years. Earlier, the annual GDP growth rate climbed to 8.2 per cent in Q4 FY18. Since then, it is almost on a downward trajectory so far. Q4 of FY19 was the only exception when the GDP increased by 0.1 per cent from the previous quarter.
While the deterioration in the manufacturing and services sectors was clearly visible in the quarter, the agriculture sector was considered to be the growth engine of the economy. During April-June, the manufacturing sector shrank by 39.3 per cent and the services sector by 20.6 per cent. On the other hand, the agriculture sector was the only area that witnessed positive growth of 3.4 per cent in the quarter.
Meanwhile, on the back of a severe financial and structural crisis in different corners of society and economy, the Modi govt rolled out a series of reforms and schemes to dampen the economic disruptions. Under ‘Atma Nirbhar Bharat’ package, the centre introduced PM Garib Kalyan Yojana to provide free food to weak and poor; MGNREGA jobs for migrant workers; relief to MSMEs; and landmark reforms in the farm sector. Amid the measures to moderate the impact of the virus, India is also picking up the pace to cut imports and raise exports to the Global markets.