India’s Q2 GDP contracts by 7.5 %, after record slump 23.9% in last quarter
New Delhi, Nov 27: India's economy recovered faster than expected in the September quarter as a pick-up in manufacturing helped GDP clock a lower contraction of 7.5 per cent and held out hopes for further improvement on consumer demand bouncing back.
The gross domestic product (GDP) had contracted by a record 23.9 per cent in the first quarter of 2020-21 fiscal (April 2020 to March 2021) as the coronavirus lockdown pummelled economic activity.
The second straight quarter of contraction pushed India to its first technical recession.
The GDP contraction of 7.5 per cent in July-September compared with a growth of 4.4 per cent in the same quarter last year, according to data released by the statistics ministry on Friday.
With the gradual opening up from June, the economy picked up momentum. Manufacturing clocked a surprise 0.6 per cent growth in July-September after it had shrunk by a massive 39 per cent in the preceding quarter.
Continuing its good showing, the agriculture sector grew by 3.4 per cent, while electricity and gas expanded 4.4 per cent.
Financial and real estate services shrank 8.1 per cent in the second quarter of FY21 from a year ago, while trade, hotels, transport and communication declined 15.6 per cent.
The construction sector, which is the second-largest employer in the economy, contracted only 8.6 per cent in Q2 versus (-) 50 per cent in Q1.
Public spending was down 12 per cent.
Analysts and economists, who have projected the economy shrinking for the full fiscal, had expected a wider contraction in Q2.
China's economy grew by 4.9 per cent in July-September this year, faster than the 3.2 per cent growth in April-June 2020.
Chief Economic Adviser Krishnamurthy Subramanian said the GDP numbers were "quite encouraging" given the pandemic and compared with the previous quarter's performance.
Giving outlook for the near future, he said, "We should be cautiously optimistic and the caution is warranted because the economic impact is primarily due to the pandemic."
Rumki Majumdar, economist, Deloitte India said recent high-frequency data possibly suggest a quicker rebound ahead.
"The possibility of a release of several highly effective vaccines soon gives us hope that there is an end date to the pandemic, even if it may not be immediate," Majumdar said.
Stating that the numbers are surely not as gloomy as was being anticipated, Mayur Dwivedi of Religare Enterprises said it now remains to be seen whether this momentum is sustained in the remaining two quarters of FY21.
In the first half, India's GDP contracted by 15.7 per cent compared to a growth of 4.8 per cent in the same period last fiscal.
Though the contraction in July-September pushed India into its first technical recession, based on records going back to 1996, a sharp recovery held out hopes for the economy turning around before the end of the fiscal year.
Analysts said the recovery was 'V' shaped.
Reserve Bank of India (RBI) Governor Shaktikanta Das had on Thursday stated that the recovery from the lockdown has been stronger than expected and the economy could show growth in the fourth quarter.
Post Q2, there has been a pick-up in consumer demand for autos, non-durables and rail freight during the festival season as prospects grew for COVID-19 vaccines to be launched early next year.
But there are downside risks as some states reimposed curbs to fight a second wave of infections, which could possibly slow the pace of recovery in the next two or three months, as well as heightening the risk of inflation.
India's tally of infections has crossed 93 lakh -- the second-highest globally after the US -- with more than 1.35 lakh deaths.
The improvement in the economy came ahead of next week's interest rate decision by the RBI.
"GDP at Constant (2011-12) Prices in Q2 of 2020-21 is estimated at Rs 33.14 lakh crore, as against Rs 35.84 lakh crore in Q2 of 2019-20, showing a contraction of 7.5 percent as compared to 4.4 percent growth in Q2 2019-20," the National Statistical Office (NSO) said in a statement.
"With a view to contain the spread of the Covid-19 pandemic, restrictions were imposed on the economic activities not deemed essential during Q1.
"Though the restrictions have been gradually lifted, there has been an impact on economic activities. In these circumstances, some other data sources such as GST, interactions with professional bodies, etc. were also referred to for corroborative evidence and these were clearly limited," it added.
Most rating agencies had projected that the fall in India's GDP for the second quarter of 2020-21 would be arrested to single digits.
Niti Aayog Vice Chairman Rajiv Kumar said the economic recovery was a 'pleasant surprise'.
"Manufacturing shows a positive growth which is the confirmation of a rebound of demand led recovery," he tweeted.
Vedanta Chairman Anil Agarwal said the Q2 GDP numbers show that economy is recovering. "Government's efforts on stimulus and reform are showing results. Hopefully, we will have positive growth in H2 FY21 and double digit growth in FY22."
India Ratings and Research said much would depend on the sustainability of the consumption demand seen in October.
"If it sustains then a faster recovery is possible. But with rising COVID-19 cases and some states hinting that they may have to impose some kind of lockdown could be a spoiler in the growth recovery process," it said.
Separate official data showed that April-October 2020 fiscal deficit at Rs 9.53 lakh crore was 119.7 per cent of the FY21 target.
Fiscal deficit has been budgeted at Rs 7.96 lakh crore for FY21.
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About 69 per cent turnout recorded in Karnataka's first phase of polling
Bengaluru, Apr 26: Voting was held on Friday for the first phase of Lok Sabha polls in Karnataka, in 14 constituencies, with an estimated over 69 per cent turnout, as the Congress and BJP locked horns again on the electoral battleground in less than a year.
According to poll officials, an approximate 69.23 per cent of the voters cast their ballot.
"This is tentative. It will vary slightly based on the detailed reports of the PRO (Presiding Officer)," an official said.
In the 2019 Lok Sabha polls, the same 14 segments in the first phase had recorded a turnout of 68.80 per cent.
Out of 14 segments that went to polls on Friday, the highest turnout of 81.48 per cent was recorded in Mandya, followed by Kolar 78.07 per cent, and the least 52.81 per cent in Bangalore Central.
The turnout was 54.42 per cent in Bangalore North, and 53.15 per cent in Bangalore South, amid indications of continued voter apathy in the city.
Bangalore Rural that is witnessing a tough contest between Congress' D K Suresh, MP and brother of Deputy Chief Minister D K Shivakumar, and Dr C N Manjunath, a noted cardiologist and son-in-law of former PM H D Deve Gowda, on a BJP ticket, has recorded 67.29 per cent.
Karnataka Chief Electoral Officer Manoj Kumar Meena told PTI that barring an incident in Chamarajanagara district, the election process was peaceful in the state.
The Electronic Voting Machines were destroyed at a polling station in Indiganatha village in Chamarajanagara district during a clash between two groups of people over whether to vote or not in the Lok Sabha elections, bringing the poll process to a halt.
According to the district administration, the villagers had earlier in the day decided to boycott the polls citing lack of adequate infrastructure development. However, after assurances and efforts by the local officials, a section of them agreed to vote, while the other was keen to boycott leading to clashes between them during which they destroyed EVMs, and also indulged in stone-pelting.
Reacting to the incident, Meena said, "Tomorrow, the returning officer in the presence of the observer will do the scrutiny and then they will recommend (further course of action.)"
A total of 247 candidates -- 226 men and 21 women -- are in the fray for the first phase covering most of the southern and coastal districts, where more than 2.88 crore voters were eligible to exercise their franchise in 30,602 polling stations.
Friday's elections witnessed a straight fight between the ruling Congress and the BJP-JD(S) combine unlike the Assembly elections in May last year which witnessed a triangular contest among the three parties.
In the first phase, the Congress contested in all 14 seats, while BJP fielded nominees in 11 and its alliance partner JD(S), which joined the National Democratic Alliance in (NDA) in September last year, in three -- Hassan, Mandya and Kolar.
Besides the three, the segments where elections were held on Friday are: Udupi-Chikmagalur, Dakshina Kannada, Chitradurga, Tumkur, Mysore, Chamarajanagar, Bangalore Rural, Bangalore North, Bangalore Central, Bangalore South and Chikkballapur.
In the 2019 Lok Sabha polls, Congress and JD(S), which were in alliance and ruling the state back then, had secured just one seat each in these 14 segments. The BJP had won in 11 and ensured the victory of a party supported independent candidate in Mandya.
Other than Suresh and Manjunath, the latter's brother-in-law and JD(S) state President H D Kumaraswamy from Mandya, erstwhile Mysuru royal family scion Yaduveer Krishnadatta Chamaraja Wadiyar from Mysore, from the BJP, are among the prominent candidates in the fray in the first phase.
Also in the contest are BJP MP Tejasvi Surya from Bangalore South against Minister Ramalinga Reddy's daughter Sowmya Reddy of Congress, and Union Minister Shobha Karandlaje on BJP ticket from Bangalore North against former Indian Institute of Management Bangalore professor M V Rajeev Gowda of Congress.
Chief Minister Siddaramaiah said there is no "Modi wave" in Karnataka, but there is one in favour of Congress government's guarantee schemes, as he claimed his party will win about 20 out of total 28 Lok Sabha polls in the state.
Asked as to how many seats the Congress will win out of 14 seats in the first phase, the chief minister said, "it cannot be said correctly as of now, as it is a secret ballot, but we will win majority seats."
Shivakumar, who is also the state Congress president, said he has got reports that the party will win more than 20 seats in Karnataka.
"In the first phase, Congress will win 10 of the 14 seats that went to polls today. This is not astrological predictions; this is based on political acumen and data," he said.
Kumaraswamy said the outcome of the elections will be in favour of the NDA alliance, of which his party JD(S) is a part.
Thanking voters, state BJP chief BJP Vijayendra said: "It is our unwavering belief that your support for the security and development of India, will give strength for the Modi-led government to come to power once again in the country."
Long queues were seen at polling booths since 7 am.
Former Prime Minister H D Deve Gowda, Siddaramaiah, Shivakumar, Kumaraswamy and Finance Minister Nirmala Sitharaman also exercised their franchise.
