India’s economy faces the worst blow in first quarter of FY 2020 - 2021

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India’s economy faces the worst blow in first quarter of FY 2020 - 2021

BENGALURU: India’s economy faces the worst blow in first quarter of FY 2020 - 2021.

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 gross domestic product in 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.

“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.