India's economy contracts 12% in Q1 FY22

18 Jun 2021 CW Team

The economy contracted at its worst rate on record in FY21, with a contraction of 7.3%, after the Centre announced a 2.5-month unplanned lockdown with only four hours' notice, crippling the economy in the first quarter with a massive 23.9% contraction, which improved to -17.5% in the second quarter.

However, the economy showed a sharp V-shaped recovery from the second half, when it posted 40 basis points of positive growth, with Q4 clipping at 1.6%, containing the year's overall contraction of 7.3%.

Tanvee Gupta Jain, an economist at UBS, says the indicator suggests that economic activity contracted by an average of 12% in the June 2021 quarter, compared to 23.9% in the June 2020 quarter, based on in-house data from the UBS-India activity indicator.

Even though the indicator rebounded to 88.7 in the week ending June 13, up 3% from the previous week, many states eased localised mobility restrictions beginning in May's last week.

Expect a gradual recovery this time, rather than the V-shaped recovery seen in 2020, as consumer sentiment remains low due to pandemic-related uncertainties. According to Tanvee Gupta Jain, the economic recovery from H2 will gain traction as vaccinations ramp up and the resulting control of the pandemic boost consumer and business confidence.

The second wave's lockdown lasted slightly longer than the first wave's 2.5 months, and industrial/construction activities were allowed on a limited scale this time.

Significantly, there is positive momentum on the vaccination front, with daily doses increasing to 3.2 million in the week ending June 13 from 2.5 million at the end of May.

Image Source

Also read: Covid-19 second wave: PM Modi asks nation to ‘repair and prepare’

According to a brokerage report, state-imposed lockdowns in April and May to contain the second wave of the deadly Covid-19 pandemic resulted in the economy contracting by 12% in the June quarter, compared to a 23.9% contraction in the same quarter in 2020. The economy contracted at its worst rate on record in FY21, with a contraction of 7.3%, after the Centre announced a 2.5-month unplanned lockdown with only four hours' notice, crippling the economy in the first quarter with a massive 23.9% contraction, which improved to -17.5% in the second quarter. However, the economy showed a sharp V-shaped recovery from the second half, when it posted 40 basis points of positive growth, with Q4 clipping at 1.6%, containing the year's overall contraction of 7.3%. Tanvee Gupta Jain, an economist at UBS, says the indicator suggests that economic activity contracted by an average of 12% in the June 2021 quarter, compared to 23.9% in the June 2020 quarter, based on in-house data from the UBS-India activity indicator. Even though the indicator rebounded to 88.7 in the week ending June 13, up 3% from the previous week, many states eased localised mobility restrictions beginning in May's last week. Expect a gradual recovery this time, rather than the V-shaped recovery seen in 2020, as consumer sentiment remains low due to pandemic-related uncertainties. According to Tanvee Gupta Jain, the economic recovery from H2 will gain traction as vaccinations ramp up and the resulting control of the pandemic boost consumer and business confidence. The second wave's lockdown lasted slightly longer than the first wave's 2.5 months, and industrial/construction activities were allowed on a limited scale this time. Significantly, there is positive momentum on the vaccination front, with daily doses increasing to 3.2 million in the week ending June 13 from 2.5 million at the end of May. Image Source Also read: Covid-19 second wave: PM Modi asks nation to ‘repair and prepare’

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