Agriculture, forestry and fishing shows 3.4% growth
As per the Statistics Ministry, India’s Gross Domestic Product contracted by 7.5% in the second quarter (July-September) of 2020-21 amid the COVID-19 crisis. This marks the second quarter in a row where the country’s GDP has contracted, implying that India has plunged into a technical recession. During the April-June quarter, India’s GDP crashed by 23.9% which was attributed to the fact that the country was among the economies worst hit by the COVID-19 pandemic.
Sectors such as agriculture, forestry and fishing (3.4%), manufacturing (0.6%) and electricity, gas, water supply and other utility services (4.4%) have recorded a positive GDP growth. The government has stated that the GDP estimates are likely to undergo revisions owing to the reliance on limited data sources. The release of the next quarterly GDP estimates shall be on February 26, 2021.
Commenting on the second quarter GDP numbers [Q2 FY21] released in recent, Dr Sangita Reddy, President, FICCI said, “The GDP figure showing a decline of 7.5% in the second quarter has come in as a pleasant surprise. This is much better than what was anticipated by most analysts and clearly reflects that the Indian economy is on a sharp recovery mode. The positive, albeit marginal, growth noted in the manufacturing sector in the second quarter is truly encouraging. Many of the high frequency indicators were showing swift correction moving into the green zone and we have also seen an improvement in the incoming corporate results for the second quarter. All these trends are quite reassuring and speak of the resilience of the Indian industry and economy.”
The policy guidance provided by the government so far has been encouraging and we hope to see continued momentum on that front. We are at a critical point on the growth trajectory and it is important that all levers are used to sustain this improvement, added Dr Reddy.
Going ahead, the government should keep a close watch on the demand side. While the festive season will continue till December and the earlier demand-oriented measures announced by the government will take effect, we feel it will be important to lend further support to consumption activity. The government can look at extending the consumption voucher idea to all rather than just government employees. The multiplier effect of consumption vouchers is more than 2 and it is an effective way to boost retail demand in the short term. Also, exchange rate can be focused on as a policy tool to boost demand. Additionally, government must continue to invest heavily in the infrastructure sector as it can be a real driver for growth and employment, said Dr Reddy.
The latest Atmanirbhar Bharat Package 3.0 will give a further boost to the economy. The PLI scheme for additional ten champion sectors indicates government’s resolve to make India a manufacturing hub and the scheme can be truly transformational, Dr Reddy added.
