Will India’s economic contraction become a recession?
The Indian economy shrank by 23.9 per cent in the first quarter (April to June) of the 2020 financial year, with much of the slump attributable to the country’s COVID-19 lockdown measures initiated on March 25. The only sector to record positive growth in the first quarter was agriculture. And while sectoral data collection is ongoing, analysts warn that numbers will need to be revised, and the situation may be graver than initially estimated. Since June, the Indian government has been conducting a phased reopening of the economy, although India will be in recession territory if the economic contraction continues through the next quarter.
Unemployment falls . . .
In April and May, unemployment spiked, reaching record highs of over 23 per cent, but fell to 7.43 per cent by July as the economy gradually reopened. Experts believe the economy will show signs of recovery this quarter, but it is unlikely to return to positive growth until the fourth quarter. The most-recent set of COVID guidelines, issued on August 29, permit the resumption of almost all normal economic activities outside specified “containment zones,” or demarcated areas within cities, villages, and municipalities with high COVID-19 case numbers where movement restrictions are severe. Broadly permitted activities exclude services such as international air travel; and the in-person operations of schools, colleges, and educational and coaching institutions. Face masks and social distancing continue to be widely required.
But the country records world’s highest daily COVID-19 number . . .
While the Indian economy is reopening in phases, the country is far from containing the spread of COVID-19; yesterday it recorded the world’s largest single-day spike with almost 79,000 new cases. India has reported over 3.5 million positive COVID-19 diagnoses and is experiencing a rising number of deaths due to the disease, although the fatality rate is low. While most of India’s COVID-19 cases are coming from a few populous states, including Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, and Delhi, the virus is now spreading fast to remote corners, including to small tribes living on the Andaman and Nicobar Islands.