India Registers Biggest GDP Drop In 40 Years
In what comes as an official announcement of India entering a state of recession, the GDP data released on Monday showed a drop of 23.9% in the April-June quarter of the current financial year (FY 2020-21). It is for the first time in 40 years when the GDP has registered negative growth. The GDP had shown 3.1% growth in the preceding January-March quarter and 5.2% expansion in the same period a year back, according to official data released.
The June quarter GDP data is the worst contraction in the history of the Indian economy mainly because the central government on March 25 had ordered a complete lockdown of most of the manufacturing and service sectors owing to the spread of COVID-19. Only essential services such as food items and medicines were allowed during this period as the country tried to curb the spread of the virus across the country. The country’s economy had last entered a recession in 1979.
As per the data by the National Statistical Office (NSO), all key sectors except agriculture witnessed contractions, with construction witnessing a drop of a whopping 50.3% while the manufacturing industry saw a 39.3% fall. Apart from these two industries, electricity, gas, water supply and other utility services slipped 7%. Trade, hotels, transport, communication and services related to broadcasting contracted 47.0%.
The data comes at a time when the government is strategically removing restrictions imposed in March to curb COVID-19 infections, which have caused thousands of job losses and forced the majority of the workforce to stay indoors, leading to a big blow to an already-slowing economy. India’s road to recovery appears a long and hard one. Economists expect growth to rebound only in the next year, mostly led by pent-up domestic demand and pick up in the manufacturing and services sectors after the easing of lockdown.
What is Gross Domestic Product (GDP)?
Gross Domestic Product, abbreviated as GDP, is the total value of goods and services produced in a country. GDP is measured over specific time frames, such as a quarter or a year. GDP as an economic indicator is used worldwide to show the economic health of a country. For low-income or middle-income countries, high year-on-year GDP growth is essential to meet the growing needs of the population. Hence, the GDP growth rate of India is an essential indicator of the country’s economic development and progress.