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Last updated: 01 Dec, 2020  

India.Growth.9.Thmb.jpg Q2 GDP surprise

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Bikky Khosla | 01 Dec, 2020

Gross Domestic Product (GDP) of the Indian economy contracted by (-) 7.5 percent in second quarter of the 2020-21 financial year, against 4.4 percent growth in the corresponding quarter of FY2019-20. No doubt, comparing these data sets does not seem relevant now, and instead the 7.5 percent decline data has now been met with all-round cheers against (-) 23.9 percent contraction in the preceding quarter. The pace of recovery has come as a pleasant surprise to economy watchers.

The latest figures have substantially changed how the Indian economy is being viewed. The first quarter GDP decline was one of the worst among the major economies, but now the second quarter contraction is far better than the global average. A report shows that average July-September GDP decline of 49 countries stands at 12.5 percent, while in comparison, India’s 7.5 percent looks much better. This is why, though India is now into a technical recession, sentiments are still widely positive.

Another positive development is that the second quarter recovery is fairly broad-based. The Gross Value Added (GVA) data shows 3.4 percent growth in agriculture, similar to the expansion seen in Q1; 4.4 percent growth in power and other utilities against 7 percent contraction in Q1; 8.6 percent contraction in construction sector against 50.3 percent contraction in Q1; and (-) 15.6 percent contraction in trade, hotels, transport, communication and services related to broadcasting against a massive 47 percent contraction in first quarter.

The most astonishing aspect of the latest GDP data set is the positive growth registered by the manufacturing sector. Though the sector grew a meagre 0.6 percent, this growth has been achieved after four quarters of constant decline. According to economy watchers, it is surprising how, despite being the worst affected sector during the first quarter due to lockdown, the manufacturing sector turned itself around in the July-September period. This pleasant surprise, without an iota of doubt, is welcome, however.

I invite your opinions.

 
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