India’s GDP collapsed by 23.9% in April-June Quarter of FY 2020-21, as per the data of the Union Ministry of Statistics and Programme Implementation. Indian economy posted its worst ever contraction in last four decades due to the COVID-induced slowdown that has hit majorly all the businesses and companies across the world.
Indian economy grew at 3.1% in January-March quarter of 2019-20 due to the decline in consumer spending, investments and contraction in exports. And the strict nationwide lockdown, imposed soon after the outbreak of novel Coronavirus in India in March, had stalled economic activities across the country and led to job losses and decline in income.
What does GDP Contraction in Q1 of FY 2020-21 imply?
The GDP Contraction of 23.9% in 2020-21 implies that the total value of goods and services generated in April-May-June Quarter of 2020-21 is 23.9% less than the total value of goods & services produced in these three months of 2019-20.
With the worst-ever collapse in GDP in Q1 this year, it is most likely that GDP growth of this full fiscal could also contract. Going by this contraction, it could be estimated that the GDP may witness decline of 7% for this fiscal.
Contraction of Major Indicators of Growth
Almost all the indicators of growth show deep contraction such as production of cement, consumption of steel, total telephone subscriptions, sale of commercial vehicles and others. Have a look at the percentage change in the major indicators that are used for GDP growth rate estimation:
What factors lead to GDP Contraction?
The GDP or the total demand of goods and services in an economy is generated from these four factors:
- Consumption Demand from individuals
- Demand generated by Private Sector
- Demand by Government for Goods and Services
- Net Demand on GDP after subtracting Imports from Exports
Estimates of Gross Value Added (GVA) of Q1 FY 2020-21
The estimates of Gross Value Added (GVA) by various sectors in Q1 show that only Agriculture, Forestry & Fishing witnessed increase in income with GVA at 3.4% and rest all other sectors saw fall in income. Here are the GVA estimates:
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