India exits technical recession as GDP grows by 0.4% in October-Dec quarter of FY 2020-21

In a heartening development, India's Gross Domestic Product (GDP) expanded by 0.4% in the third quarter (October-December) of 2020-21 amid the COVID-19 crisis. The data released by the National Statistical Office on Friday effectively implies that the country's economy is back on track in the wake of low novel coronavirus cases and increased economic activity. This makes India one of the only major economies in the world to post growth in the last quarter of 2020. This development also assumes significance as India has come out of a technical recession.

During the April-June quarter of 2020-21, the 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. This was followed by the contraction of GDP by 7.5% in the second quarter (July-September). As the GDP contracted for two quarters in a row, the country plunged into a technical recession. However, even then, sectors such as agriculture, forestry and fishing (3.4%), manufacturing (0.6%), and electricity, gas, water supply and other utility services (4.4%) recorded a positive GDP growth. In its Monetary Policy Review presented on February 5, the Reserve Bank of India had projected a GDP growth of 10.5% in the financial year 2021-22. 

Read: Shah Talks Of Making Assam, NE Biggest Contributor To India's GDP

Estimates likely to undergo revision

On this occasion, the Statistics Ministry clarified that the Centre's measures to combat the novel coronavirus crisis has had an impact on the economic activities as well as on the data collection mechanisms. Therefore, it indicated that the GDP estimates are likely to undergo sharp revisions in due course of time. Moreover, the recent spurt in COVID-19 cases in some states such as Maharashtra and Kerala can potentially impact the economy owing to fresh restrictions being imposed. The release of the GDP estimates for the fourth quarter of 2020-21 (January-March) shall be on May 31, 2021. 

In a statement, the Centre noted, "The measures taken by the Government to contain spread of the Covid-19 pandemic have had an impact on the economic activities as well as on the data collection mechanisms. The data challenges in the case of other underlying macro-economic indicators like IIP and CPI, used in the estimation of National Accounts aggregates and specific measures, if any, taken by the government in the following months with a view to address the pandemic led economic situation will have implications on subsequent revision of these estimates. Estimates are, therefore, likely to undergo sharp revisions for the aforesaid causes in due course, as per the release calendar. Users should take this into consideration when interpreting the figures." 

Read: Budget 2021 Eyes National Monetisation Pipeline & Aatmanirbhar Manufacturing For $5Tn GDP