India’s GDP contracts by record 23.9% in first quarter of FY2020

News Network
August 31, 2020

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Bengaluru, Aug 31: India’s economy contracted at its steepest pace of 23.9% in the June quarter as the pandemic lockdown dented consumer and business spending, putting pressure on the government and central bank for further stimulus and a rate cut.

The gross domestic product (GDP) data released on Monday showed consumer spending, private investments and exports all collapsed during the world’s strictest lockdown imposed in late March to combat the COVID-19 pandemic.

A Reuters poll of economists had forecast that GDP in the world’s fifth-largest economy will contract by 18.3% in the June quarter, compared with 3.1% growth in the previous quarter, the worst performance in at least eight years.

COMMENTARY

PRITHVIRAJ SRINIVAS, CHIEF ECONOMIST, AXIS CAPITAL, MUMBAI

“The June-quarter GDP growth number confirms that India’s national lockdown was the most severe and the deepest GDP decline among large countries.

“The gradual reversal of the lockdown since mid-April is likely to reduce the severity of GDP contraction in coming quarters. However, to erase the contraction fully we need to see an improved consumer sentiment.”

SHASHANK MENDIRATTA, ECONOMIST, IBM, NEW DELHI

“As expected, growth contracted sharply in the June quarter. Investment demand recorded a 47% decline, while private consumption recorded a contraction of nearly 20%. With a contraction of 20.6% y/y, service sector was a key drag on the growth.

“While the overall growth print witnessed the weakest decline on record, this also marks a bottom in our view. Our assessment is that investment will likely stay weak, while consumption activity is likely to improve in subsequent quarters. For a broader recovery, however, supportive policy will need to provide a push.”

ADITI NAYAR, PRINCIPAL ECONOMIST, ICRA, GURUGRAM

“The GDP and GVA plunged precipitously in the lockdown-ridden Q1 of FY2021, both printing similar to our forecast of a 25% contraction. Moreover, incoming data on the MSME and less-formal sectors could manifest in a deeper contraction when revised data is released subsequently. We maintain our forecast that the Indian economy will contract by 9.5% in FY2021.

“The wide discrepancy between the double-digit growth of the government’s final consumption expenditure and the contraction in public administration, defence and other services on the production side, is rather incongruous.”

SUVODEEP RAKSHIT, SENIOR ECONOMIST, KOTAK INSTITUTIONAL EQUITIES, MUMBAI

“Real GDP growth at (-)23.9% in 1QFY21 was much lower than what the markets were expecting. The choice for the government will be on whether the consumption or the investment side needs to be pushed. Given the limited fiscal space and the need to stimulate a more durable growth, the growth recovery will be gradual and is likely to continue into 1HFY22.”

MADHAVI ARORA, LEAD ECONOMIST, FX AND RATES, EDELWEISS SECURITIES, MUMBAI

“The Q1 GDP growth print came in worse than our expectations of -18%. The surprise take-away elements were the better-than-expected performance of finance and real-estate sectors, and more pertinently, a sharp contraction in public administration (proxy for government spending) data. Nonetheless, it does little to change the broad contours of the growth trajectory.

“The sub-optimal policy response would only mean the downward cycle could stretch further, while structural constraints limit sustained secular growth pick-up ahead. We think the government will have to loosen its fiscal strings further in 2HFY21 if growth prospects remain weak.” SAKSHI GUPTA, SENIOR ECONOMIST, HDFC BANK, GURUGRAM”Given the lack of reporting due to the lockdown in Q1 (especially for the informal sector), we expect the GDP numbers to be revised down further in subsequent releases.

“Hopes of an economic recovery in the second half of the year have been pinned on a rural sector revival. However, with the virus spreading to the hinterland, the rural support might be lower than expected.

“In terms of the growth prints, Q1 is likely to be the worst print and it will be a very slow grind up from this bottom going forward. We continue to expect a -7.5% growth print for the year with a downward bias to our forecast.”

RAJANI SINHA, CHIEF ECONOMIST, KNIGHT FRANK INDIA, MUMBAI

“The sharp fall in the first-quarter GDP is on expected lines, given that around 70-80% of the economy was on a standstill in the first two months of this quarter.

“With the economy unlocking in the last few months, most economic parameters have improved to 70-90% level of the corresponding period of last year. However, a sustainable recovery would depend on the time taken to contain the spread of virus. Increased infrastructure investment by the government and demand-boosting measures are much required for the economy to recover.”

SUJAN HAJRA, CHIEF ECONOMIST, ANAND RATHI SECURITIES, MUMBAI

“This kind of a decline was expected as there was a lockdown for roughly half of the quarter. The infrastructure data showed the decline was less than 10%, and with the exception of cement and steel, all other sectors have done reasonably well. “The Reserve Bank of India (RBI) won’t lose too much sleep on this number as it was expected. The RBI still has its focus on growth. This (GDP number) slightly improves chances of a rate cut in October. Unless the inflation comes below 5% in the next reading, the RBI still might postpone the rate cut to December.”

RUPA REGE NITSURE, GROUP CHIEF ECONOMIST, L&T FINANCIAL HOLDINGS, MUMBAI

“Contraction of real GDP at 23.9% appears to be underestimated, as data collection efforts were hit by the pandemic.

“The NSO had to use substitutes and proxies to estimate the losses of informal sector. So there is a very high probability that this data will undergo several revisions in the future. But broader trends are clearly visible.

“Unless the central and state governments focus on re-starting the economic machine completely, the real process of repair and reconstruction will not gain momentum. Unless this is given the top-most priority, India will get trapped with the unsustainable debt burden.”

UPASNA BHARDWAJ, SENIOR ECONOMIST, KOTAK MAHINDRA BANK, MUMBAI

“After a record contraction in Q1, we expect the following quarters to normalise registering a much slower fall. The high-frequency data since June has been suggesting a significant pickup in activity. Nonetheless, the weakness in demand is expected to weigh across all sectors and some policy support will be necessary to cushion any further deterioration.

“We expect some kind of stimulus from the government in the coming few months. The recent policy measures from the RBI will help cap any sharp upside risks to bond yields in case of any incremental supply.”

SIDDHARTHA SANYAL, CHIEF ECONOMIST AND HEAD OF RESEARCH, BANDHAN BANK, KOLKATA

“The GDP contraction of nearly 24% y/y during Q1 FY21 was clearly sharper than expected. Also, given the lack of clarity about whether the disruption in informal sector activities were captured adequately, the possibility of further worsening of Q1 FY21 GDP estimate during subsequent rounds of revisions cannot be ruled out. Overall, GDP looks set to record near double-digit contraction during FY21.

“However, rural activities seem to be relatively more resilient at the moment and might benefit from the government’s rural-focused employment schemes. Given the recent uptick in CPI prints, it seems that the RBI may not be in a position to cut rates in the near-future.”

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News Network
April 4,2025

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Israel has announced the launch of a new ground onslaught in Gaza City, with rescuers saying military aggression has killed at least 30 people across the Palestinian territory since dawn.

In Gaza City, the Israeli military said ground troops had begun pushing into the Shejaiya neighborhood to expand the so-called "security zone" there, claiming that civilians had been allowed to evacuate the area. 

Initial reports, however, said a Palestinian woman and her daughter were just killed in an Israeli artillery shelling on displaced people in Shejaiya.

Gaza's civil defense agency said Israeli military aggression had killed at least 30 people in the Palestinian territory since dawn, adding that the toll was "not final".

A single Israeli strike on Khan Yunis killed at least 25 people, a medical source at the southern city's Nasser Hospital said. 

"The situation is very dangerous, and there is death coming at us from every direction," Elena Halas told AFP reportedly via text message, adding that she and her family were trapped in her sister's house in Shejaiya.

Israel has pushed since the collapse of a short-lived truce in the war to seize territory in Gaza. Simultaneously, it has escalated attacks on Lebanon and Syria, with a strike in the south Lebanese city of Sidon killing a Hamas commander along with his son on Friday. 

Minister of military affairs Israel Katz had said on Wednesday that Israel would bolster its military presence inside the Gaza Strip to "seize large areas that will be incorporated into Israeli security zones", without specifying how much territory.

Prime minister Benjamin Netanyahu said the military was dividing Gaza and "seizing territory" to force Hamas to free the remaining captives seized in the October 2023 operation inside southern settlements. 

Netanyahu has said his regime is working closely with the US to implement President Donald Trump's plan to displace Gazans.

Latest air raids have targeted Gaza City, as well as Beit Lahia, Rafah, and Khan Yunis, killing dozens of people and injuring several others.

On Thursday, hundreds of thousands of fleeing Gazans sought shelter in one of the biggest mass displacements of the war, as Israeli forces advanced into the ruins of the city of Rafah. 

A day after declaring their intention to capture large swathes of the crowded territory, Israeli forces pushed into the city on Gaza's southern edge which had served as a last refuge for people fleeing other areas for much of the war.

The Ministry of Health in Gaza said on Thursday that 112 Palestinians were killed by Israeli airstrikes, with at least 70 of those deaths taking place in Gaza City, in the north of the strip. 

Gaza's civil defense agency said women and children were among the dead, while six people were still unaccounted for in the strike on Dar al-Arqam School in the al-Tuffah neighborhood, northeast of Gaza City, including a pregnant woman who was expecting twins. 

Beit Hanoun Mayor Mohammad Nazek Al-Kafarna was one of the victims of the Israeli strike that hit the school on Thursday.

The Health Ministry said on Thursday that 1,163 people have been killed in the Palestinian territory since Israel resumed intense bombing on March 18, bringing the overall death toll since the war began to 50,523.

The usurping entity accepted longstanding negotiation terms by the Hamas resistance group under a Gaza ceasefire, which began on January 19.

On March 18, however, Israel unilaterally broke the truce and resumed its relentless bombing of Gaza.

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Agencies
April 6,2025

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New Delhi, Apr 6: President Droupadi Murmu on Saturday gave her assent to the Waqf (Amendment) Bill, 2025, which was passed by Parliament earlier this week.

Murmu also gave her assent to the Mussalman Wakf (Repeal) Bill, 2025.

"The following Act of Parliament received the assent of the president on April 5, 2025, and is hereby published for general information: The Waqf (Amendment) Act, 2025," the government said in a notification.

Parliament early on Friday approved the Bill after the Rajya Sabha gave its nod to the contentious legislation following an over 13-hour debate.

The discussion witnessed staunch objections from opposition parties, which termed the Bill "anti-Muslim" as well as "unconstitutional", while the government responded that the "historic reform" would benefit the minority community.

The Bill was passed in the Rajya Sabha with 128 members voting in favour and 95 opposing it.

It was passed in the Lok Sabha early on Thursday, with 288 members supporting it and 232 against it.

Parliament had also approved the Mussalman Wakf (Repeal) Bill, with the Rajya Sabha giving its nod. The Lok Sabha had already given its assent to the Bill.

After the president gave her assent, it has also become a law.

Congress MP Mohammad Jawed and All India Majlis-e-Ittehadul Muslimeen (AIMIM) president Asaduddin Owaisi on Friday challenged the validity of the Waqf (Amendment) Bill in the Supreme Court, saying it violated constitutional provisions. 

Jawed's plea alleged the Bill imposed "arbitrary restrictions" on Waqf properties and their management, undermining the religious autonomy of the Muslim community.
The petition, filed through advocate Anas Tanwir, said it discriminated against the Muslim community by "imposing restrictions that are not present in the governance of other religious endowments".

Jawed, the Lok Sabha MP from Kishanganj in Bihar, was a member of the Joint Parliamentary Committee on the Bill and alleged in his plea that it "introduces restrictions on the creation of Waqfs based on the duration of one's religious practice".

In his separate plea, Owaisi said the Bill took away from Waqfs various protections accorded to Waqfs and Hindu, Jain and Sikh religious and charitable endowments alike.

Owaisi's plea, filed by advocate Lzafeer Ahmad, said, "This diminishing of the protection given to Waqfs while retaining them for religious and charitable endowments of other religions constitutes hostile discrimination against Muslims and is violative of articles 14 and 15 of the Constitution, which prohibit discrimination on the grounds of religion."

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News Network
April 7,2025

Mangaluru, Apr 7: A price storm is brewing in Mangaluru’s hotel and restaurant industry. Faced with skyrocketing raw material costs and mounting overheads, hoteliers are preparing to hike food prices by up to 10% within a month — a move that could hit the pockets of thousands of diners across Dakshina Kannada.

From milk and oil to LPG and staples like rice and toor dal, prices have surged, pushing both vegetarian and non-vegetarian establishments to the brink. Over 65% of hotels operate in rented spaces, and labour shortages are adding fuel to the fire.

Swarna Sunder of Dinki Dine says running a hotel without burdening customers is becoming near-impossible. “Costs are rising daily. We’re trying to strike a balance, but a hike is inevitable,” he said, calling Mangaluru a highly price-sensitive market.

Industry leaders, including the Dakshina Kannada Hotel Owners Association, are expected to meet soon to formalize the revision.

Meanwhile, hoteliers blame "unhealthy competition" for further disrupting the sector. “Some serve unlimited fish meals under ₹60 — it’s unsustainable and unfair,” said a hotelier, adding that such practices are forcing smaller eateries to shut shop.

Chandrahas Shetty, president of the district association, confirmed that rising input costs have left them with little choice but to revise menus.

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