India out of recession as GDP expands 0.4%

NEW DELHI: The Indian economy came out of contraction zone in the second half of the current fiscal year as lockdown restrictions were eased significantly, economic activities resumed, and the government increased its capital expenditure.

India’s gross domestic product (GDP) grew at 0.4% on a year-on-year basis in the quarter ending December 2020, according to data released by the National Statistical Office (NSO) on February 26. A Reuters poll of economists had projected this number to be 0.5%. The economy suffered an annual contraction of 24.4% and 7.3% in the quarters ending June 2020 and September 2020, as per revised data released on Friday. This was largely a result of the lockdown’s disruption to economic activity. India imposed a 68-daylong lockdown — it was among the most stringent in the world — beginning March 25.

To be sure, the Indian economy will still face its largest ever contraction in the current fiscal year. According to the second advanced estimates of GDP in 2020-21, released along with the December quarter numbers, GDP is expected to contract by 8% in 2020-21. High frequency indicators such as the Nomura India Business Resumption Index (NIBRI) suggest that the economy is already back to prepandemic levels. NIBRI touched 99.3 – 100 is the pre-pandemic base — in the week ending February 21. Even though Covid-19 cases are rising again in some states, as of now, India seems to have escaped a second wave of infections.