Economy turns the corner but spike in new cases threatens fragile recovery

According to the NSO data, the GDP during the October-December period went up by just Rs 14,000 crores but it was enough to take the country out of the recession phase, writes ETV Bharat's Deputy News Editor, Krishnanand Tripathi.

New Delhi: Indian economy formally came out of the recession during October-December period after six-month long negative growth as the gross domestic production (GDP) registered an increase of 0.4% year-on-year in the third quarter, according to the latest official data, but the recent surge in new Covid cases in India’s industrial states like Maharashtra poses a serious challenge to the fragile recovery in the economy.

“GDP at Constant (2011-12) prices in the third quarter of FY 2020-21 is estimated at Rs 36.22 lakh crore, as against Rs 36.08 lakh crore in the third quarter of FY 2019-20, showing a growth of 0.4 percent,” the National Statistical Office (NSO) said on Friday evening.

According to the NSO data, the GDP during the October-December period went up by just Rs 14,000 crores but it was enough to take the country out of the recession phase.

The recovery is namely driven by the agriculture sector, which registered a growth of 3.5% during the third quarter as per the constant price. While seven other important sectors, including mining and quarrying, manufacturing, electricity, gas, water & utility services, construction, trade, hotels, transportation, financial real estate and professional services, and public administration and defence services registered a decline as per the gross value added (GVA).

However, as per the second advance estimate for the full fiscal, the GDP is expected to register a decline of 8 per cent in the current fiscal as against the growth of 4% registered during the previous fiscal.

According to the NSO, the real GDP estimated at the constant price (2011-12) will attain a level of Rs 134.09 lakh crore in the current fiscal as against the level of Rs 145.69 lakh crore during the FY 2019-20.

It is a sharp decline of Rs 11.6 lakh crore for the year, it means, the production of goods and services in the country in the current fiscal would come down by nearly Rs 1 lakh crore per month, on an average, in comparison with the goods and services produced in the last financial year.

Average monthly production in the country was at around Rs 12.14 lakh crore in the FY 2019-20 but it is expected to decline to Rs 11.17 lakh crore in the current fiscal.

Spike in new Covid cases threatens recovery

Although the economy is turning the corner but this marginal growth registered during the third quarter (October-December period) is primarily driven by high festive season demand when online sales also recorded a sharp jump.

However, the fragile recovery is followed by a spike in new cases this month in five states, Maharashtra, Punjab, Kerala, Chhattisgarh and Madhya Pradesh, which is causing concerns as local lockdowns may once again cripple the economic activity.

While Maharashtra has imposed restrictions in certain parts, chief minister Uddhav Thackeray said he was ready to extend restrictions in the entire state.

India’s daily new case count had hit the peak in September last year when more than 90,000 to 95,000 cases were reported daily.

At the start of this month, the count of daily new cases had fallen to below 10,000 a day, however, it has once again gone up to 16,000 to 17,000 new cases in the last two-three day.

The number of active cases is also rising in the last few days. These developments prompted the Centre to rush a team of specialists to these states to tackle a potential second wave of Covid-19 global pandemic.