Although the numbers represent an improvement from the record contraction of 23.9 percent in the last quarter, they indicate that the third largest economic power in Asia is preparing for a difficult battle at a time trying to revive demand and create jobs despite the high number of new infections with the Corona virus.
Recording of contraction in two consecutive quarters means that the country is now entering a “technical recession” for the first time since 1947.
After the imposition of lockdown measures around the world, the growth of major economic powers including the United States, Japan and Germany in the quarter that ended on September 30, boosted expectations that India will recover as well.
While consumer business improved thanks to increased spending ahead of the holiday season in October and November, hopes for a broader recovery could be dashed by the damage to the construction and hospitality sectors.
The agricultural sector was relatively bright, while industrial activity increased during the period between July and September after collapsing by about 40 percent in the previous quarter due to the closure.
Analysts saw the numbers as encouraging, indicating that the economy will likely perform better in the next quarter of the year.
“The worst is over for the Indian economy, given all the indicators … we will witness a continuous improvement,” said Samir Narang, chief economist at the state-owned Bank of Broda.
“Friday’s data exceeded the bank’s expectations of an eight percent contraction,” he told AFP, stressing that the economy is on the way to recovery unless the high number of infections leads to a new closure.
New Delhi has tried hard to relaunch its economy, which is expected to contract by 9.5 percent this year, according to an estimate published by India’s central bank governor Shaktikantha Das last month.
In turn, the International Monetary Fund predicted that the Indian economy will contract by 10.3 percent this year, in the largest downturn of any emerging major economy and the worst since independence.
A report issued by “Oxford Economics” earlier this month stated that India’s economy will be the most affected even after the severity of the epidemic subsides, indicating that annual output will be 12 percent below pre-virus levels until 2025.