India's GDP Q2 2020: Economic contraction narrows to 7.5% from 23.9% in Q1

In line with analyst estimates for its performance in the July-September quarter (Q2) of 2020-21, the Indian economy contracted 7.5 per cent from the same quarter last year, official data released by the National Statistics Office showed on Friday. This was a significant improvement over an unprecedented 23.9 per cent year-on-year contraction witnessed in the April-June quarter of this year. In the September quarter of 2019-20, the country had reported a year-on-year gross domestic product (GDP) growth of 4.5 per cent.

The country's gross value added (GVA) contracted by seven per cent during the quarter. Another set of data released on Friday showed that the eight core infrastructure sectors of the economy saw a 2.5 per cent contraction over a the same quarter last year.

Even if India continues to be in a technical recession, a drop in the rate of GDP contraction signals a revival for the economy after a major plunge in the wake of the coronavirus pandemic.
 
However, even with a smaller rate of contraction, the Indian economy remains one of the worst performers among 24 major countries. Apart from India, the UK has shown a contraction of 9.6 per cent in the July-September period. China, on the other hand, is the only country that has shown growth at 4.9 per cent during the same period.

 
Every rating agency, barring Barclays, had revised its projection for the Indian economy in the July-September quarter to reflect an improvement from its earlier forecast. The improvement seen over the first quarter, which had been marred by a near shutdown of the economy with back-to-back lockdowns in place to prevent the spread of the coronavirus pandemic, followed a gradual easing of restrictions in the July-September period. The Reserve Bank had earlier projected that India's economic contraction for full 2021-20 would be 9.5 per cent.

 
The predictions by analysts and agencies had differed widely. While Bank of America Securities had expected the fall in GDP to be 7.8 per cent and NCAER had pegged the figure at 12.7 per cent, CRISIL had said the decline in the economy would be less than 10 per cent against its earlier estimate of 12 per cent.

Earlier in the day, markets remained on the edge in anticipation of the Q2 GDP numbers. The benchmark indices ended the volatile session in the negative territory ahead of the data release. While the S&P BSE Sensex slipped 110 points, or 0.25 per cent to 44,150 levels, the National Stock Exchange’s Nifty50 index ended at 12,969, down 18 points, or 0.14 per cent. Power Grid, HCL Tech, and ONGC (all down around 2 per cent) were the top Sensex laggards.