‘India is worst-hit major market as growth shrinks’
CONSUMER BUSINESSES SEE INCREASE IN SPENDING BUT CONSTRUCTION AND HOSPITALITY SECTORS FAIL TO PICK UP
INDIA’S economy contracted 7.5 per cent between July and September, putting it among the worst-performing major advanced and emerging economies as it entered a technical recession for the first time since independence, official data showed last Friday (27).
Although the figures were an improvement on the record 23.9per cent contraction recorded last quarter, they indicate Asia’s third-largest economy is in for a tough fight as it attempts to revive demand and create jobs even as coronavirus infections climb.
The two successive quarters of contraction mean the country has now entered a “technical recession” for the first time since 1947. After virus-related lockdowns ravaged the globe, the growth recorded by major economies, including the US, Japan and Germany, in the quarter ending on September 30 raised expectations India would also enjoy a revival.
However, while consumer businesses saw a boost due to increased spending in the runup to the October-November festive season, hopes of a broader recovery were dashed, with the construction and hospitality sectors taking a hit.
Farming continued to be a relatively bright spot, while manufacturing activity also increased during the July-September period after plunging nearly 40 per cent during the previous quarter due to the lockdown.
Analysts said the figures were encouraging, suggesting the economy might fare better in the next quarter. “The worst is over for the economy looking at all the indicators. We will see a continued improvement... going forward”, said Sameer Narang, chief economist at the Bank of Baroda.
Narang said last Friday’s data had beaten the bank’s estimates of an eight per cent contraction and said the economy was primed for a recovery so long as a spike in infections did not trigger a fresh lockdown.
India has struggled to kickstart an economy that is expected to shrink 9.5 per cent this year, according to estimates released by India’s central bank governor Shaktikanta Das in October.
The International Monetary Fund has meanwhile predicted that India’s economy would contract by 10.3 per cent this year, the biggest slump for any major emerging economy and the worst since independence.
A report by Oxford Economics released in November said India would be the worst-affected economy even after the pandemic eases, stating that annual output would be 12 per cent below pre-virus levels through 2025.
India’s economy struggled to gain traction even before the pandemic, and the hit to global activity from the virus and one of the world’s strictest lockdowns combined to deal the country a severe blow. Many were left jobless almost overnight, including tens of millions of migrant workers in the shadow economy, due to the lockdown earlier this year.
The government has since been easing restrictions to revive activity, announcing two stimulus packages to offer farmers easier access to credit and dole out benefits to small businesses.
The relaxation measures have been deployed even as the coronavirus continues to ravage the country, which has registered more than 9.4 million infections and over 138,000 deaths, as Eastern Eye went to press on Tuesday (1).
Last Thursday (26), central bank governor Das warned the recent surge in virus cases and the imminent threat of new lockdowns posed further risks. “We need to be watchful about the sustainability of demand and a possible reassessment of market expectations surrounding the vaccine,” Das said.