India's GDP crashes to -23.9% in Q1- FY21 due to COVID-19; worst contraction till date

In a devastating development, India's GDP for first quarter of FY 21 stood at -23.9% as per data released by National Statistical Office (NSO) on Monday, making it worst contraction on record. In May, amid nation-wide COVID-19 lockdown, India's GDP growth for January-March quarter (Q4) 2019-20 stood at 3.1%. Overall FY 19-20 GDP stood at 4.2%, hitting an 11-year low. India, currently has extended its lockdown in containment zones till September 30, freeing up most restrictions.

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India's GDP crashes to -23.9% for Q1

As per market reports, core sectors' growth stood at - Industries at -381%, Services at -20.6%, Manufacturing at -39.3 %, Trade, Hotels at -47. Agriculture has been only sector to see growth clocking a 3.4% increase, due to rural sector remaining mostly free from lockdown. CRISIL had predicted that India's fourth recession since independence, first since liberalisation and perhaps worst to date, is here.

India's overall GDP for FY20 stands at 4.2% - hitting 11-year low amid lockdown 4.0

Ecomy to shrink, Inflation to rise

On August 6 , RBI Goverr Shaktikanta Das decided to keep repo rate unchanged at 4 percent, stating  for year 2020-21 as a whole, real GDP growth is also estimated to be negative. RBI goverr furr said inflation is expected to be at elevated levels during second quarter, however, may ease in second half of current fiscal year. He said that supply chain disruptions persist, resulting in inflation pressures across segments. Pinning hope on agriculture sector, he said, Kharif crop harvest is expected to boost rural demand. 

RBI keeps key Repo rate unchanged at 4%; predicts 2020-21 real GDP growth to be negative

Moreover, amid falling growth, at 41st GST Council meeting, Centre refused to pay mandatory GST compensation of 14% for current year due to COVID-19 pandemic.  Finance Minister Nirmala Sitharaman stated that ecomy is facing an extraordinary 'Act of God' situation, which may result in ecomic contraction. It also gave states two options, which has t been accepted by most states, who are also seeing ecomic contractions.

• To alleviate state's GST stress, Revenue Secretary Ajay Bhushan Pandey said a special window can be provided to states at a reasonable interest rate for borrowing of Rs 97,000 crore - amount can be repaid after five years (of GST implementation) ending 2022 from cess collection.
• second option before states is to borrow entire Rs 2.35 lakh crore shortfall under special window. "States have been given seven days' time to think over proposal," Pandey said.

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