NEW DELHI: The Indian economy has witnessed a drastic contraction in quarterly GDP, shrinking 23.9 per cent in the first quarter of the ongoing financial year. To counter the damage, the industry said that the government should step in aggressively and roll out the next set of fiscal and monetary measures to bolster slackening demand.
According to former chief statistician Pronab Sen, GDP fall may “underestimate the impact of the Covid-19 pandemic” since the NSO might have come up with a much lower contraction considering that corporate data was used as a proxy for the informal sector.
Govinda Rao, Chief Economic Advisor, Brickwork ratings echoed similar sentiments. “The absence of data on the informal sector, which was among the worst hit sectors during the first quarter of 2020-21 due to the lockdown, these GDP numbers may only be revised downwards,” he said, warning that the economy has entered a recession.
The industry, meanwhile, anticipates a recovery in the second half of the year suported by government measures.“The government through the Atma Nirbhar package has given significant impetus. There is now a need to have enhanced focus on execution. In addition, the government may consider further measures like putting more money in hands of the vulnerable and weaker sections of society. The festive season has already begun and some positive signaling, by way of GST cut for instance, might give a push to consumption activity,” said Sangita Reddy, President, FICCI.
CII Director General Chandrajit Banerjee, too, expects “a recovery in the second half led by supportive fiscal and monetary policies.” Growth in the farm sector (+3.2 per cent) and government spending (16.4 per cent), he said, has provided some cheer, and the gradual lifting of lockdowns is likely to improve economic activity.