India's GDP contracts 7.5% in Q2, economy enters technical recession

India's Gross Democratic Product (GDP) contracted 7.5 per cent in the quarter ending September as compared to the same period last year, the data released by the Ministry of Statistics and Programme Implementation revealed on November 27. This also means that Indian economy officially enters technical recession.

Data suggests a recovery path for the Indian economy in the July-September period after a 23.9 per cent contraction in the previous quarter (April-June) of the current financial year.

Indian economy marked a significant improvement over the massive contraction in the previous quarter, the analysts said.

The coronavirus pandemic and the nationwide lockdown were the reasons behind a record contraction previously. There are now signs of a pick-up in the economy after the ease in restrictions and better awareness of the pandemic.

"Q2 GDP of 2020-21 is estimated at Rs 33.14 lakh crore, as against Rs 35.84 lakh crore in Q2 of 2019-20, showing a contraction of 7.5 per cent as compared to 4.4 per cent growth in Q2 2019-20," data stated.

"Quarterly GVA (gross value added) for Q2 of 2020-21 is estimated at Rs 30.49 lakh crore, as against Rs 32.78 lakh crore in Q2 of 2019-20, showing a contraction of 7," it added.

In this period, the agriculture sector remained strong and showed a growth of 3.4 per cent. The trade and services sector showed a contraction of 15.6 per cent, which was lower than expected.

This is an improvement over the estimates made by financial institutions. The internal model of the Reserve Bank of India expected a GDP contraction of 8.6 per cent in the quarter ending in September. In a Reuters poll, economists had forecast that the GDP would shrink 8.8 per cent.

India witnessed an economic slowdown even before the pandemic. The economy had grown at 3.1 per cent in the January-March quarter, which marked its slowest growth in at least eight years.