NEW DELHI – India’s economy contracted at its steepest pace on record of 23.9% in the June quarter as the COVID-19 pandemic lockdown cut consumer and business spending, putting pressure on the country’s government and central bank for additional stimulus and a rate cut.
The gross domestic product (GDP) data released yesterday showed consumer spending, private investments and exports all collapsed during the world’s strictest lockdown imposed in late March to combat the COVID-19 pandemic.
Prime Minister Narendra Modi announced a US$266 billion stimulus package in May, including credit guarantees on bank loans and free food grains to poor people, but consumer demand and manufacturing have yet to recover.
Sujan Hajra, chief economist at Anand Rathi Securities, Mumbai, said the economic slump was widely expected as India was under lockdown for almost half of the quarter.
“This (GDP number) improves chances of rate cut in October slightly,” he said.
Data showed that manufacturing has already entered recession as the output fell 39.3% in June quarter after falling 1.4% in the previous quarter.
The number of COVID-19 cases has been spreading in India faster than anywhere else in the world, with more than 3.6 million already infected and a death toll of over 64,400.
However, with an annual growth of 3.4% in the April-June quarter, the farm sector, which accounts for 15% of economic output, gave some hope the rural economy will be able to support millions of migrant workers who have returned to their villages.