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Economy grows by record 20.1% in June quarter after the covid slump

Economy grows by record 20.1% in June quarter after the covid slump

Given all India’s economy and political woes, a ray of hope has penetrated through India’s gloomy dome of contraction. According to the reports released recently, India’s gross domestic product impressively showed growth shooting up by 20.1 per cent. This rise was documented for the April-June period, which is also effectively known as the first quarter of the financial year 2021-22.


It is to be noted that given the unprecedented level of contraction that was witnessed last year, the recent growth is actually a remarkable recovery that is being witnessed by India. The contraction that was witnessed during the period of the last fiscal was effectively quite crippling and had led to strategic high losses in the economy.

The contraction of -24.4 per cent was the worst contraction that was seen by India in decades. This was mainly due to the crippling lockdown that was placed in the economy to control the spread of the virus. On the other hand, it is worthy of mentioning here that the immense contraction actually due to the nature of the lockdown that was placed in the economy.

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Given, that the lockdown was a blanket lockdown and not a partial lockdown, significant economic activities like manufacturing, contraction etc. were eased in the economy which had led to the immense contraction that was recorded for the first time in decades.

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The remarkable GDP growth

What makes the recent growth in GDP truly impressive and healthy is that such an improvement was seen despite the onslaught of the crippling second wave of covid that had inflicted not only financial woes but also humanitarian losses on the economy. It is to be noted that with the onset of the pandemic, the health crisis in India was at its peak.

This had effectively had led to the imposition of stringent lockdown in places and various states that had crippled the mobility of the public and hence the demand in the economy. With demand low and investments in the economy too at an all-time low, unemployment too had crept in.

With the economic slumping and the unemployment rate touching record highs, it is to be noted that the growth that was registered was not only good but quite an extraordinary feat achieved.

Thus, it can be rightly stated that the country’s economy has in fact recovered quite rapidly after it had registered pestering negative growth for the first two quarters of the financial year 2020-21.


Quarter-wise breakdown of data

It is to be noted that recent robust GDP growth makes it the third quarter of consequent positive growth. According to the reports that the economy had increased or registered growth by only 0.5 percent in the third quarter of 2020-21 and was slightly up by 1.6 per cent that was recorded in the fourth quarter of the financial year 2020-21.


However, it is worthy of mentioning here that the double-digit growth that has been witnessed by India its GDP is quite in sync with the predictions that were made by the RBI. This came even after various economic and rating agencies had degraded their predictions of India’s GDP growth. This was mainly due to the slump in the vaccination pace in the economy and higher predictions of a third wave which might send the economy in another lockdown.


According to the central bank’s GDP predictions, the first quarter of the financial year 2021-22 was predicted to grow likely by 18.5 per cent. Though this, itself was a degradation from the earlier projections and even mightier predictions of a 26.2 per cent growth rate.

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Consequently, in addition to revising down quarter growth estimates, the GDP growth forecast was too slashed to 9.5 percent for the financial year 2021-2022 from the earlier10.5 percent.


Robust FDI inflows recorded

In addition to robust economic GDP numbers, high FDI inflows up by 80 percent have to been recorded. In FDI inflows, inflows in equity recorded the highest growth of 169 percent. The highest gainers in terms of sectors were digital, services, automobiles, etc. on the other hand, in terms of various states, Karnataka gained the highest traction of 48 0ercent FDI inflows followed by the financial capital of India Maharashtra, and the political capital Delhi.

Given the slump that was being experienced in terms of manufacturing, construction, and healthcare, FDI inflows could have saved the day with record humungous inflows. In fact, according to the Unctad report, India and China were the highest gainers in terms of the countries. In comparison, the global economy’s FDI inflow plunged to a record low first time since the 1990s.

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It is here to be noted that in the financial year 2020-21, the growth was in the first quarter was -24.4 percent and that in the second was -7.4 percent. Thus, it is also due to this reason that India has recorded record GDP growth for the financial year 2021-22. It is due to the low base that was provided last year by high contraction that led to such high numbers being recorded this financial year.

Tough the complete blanket lockdown had crippled the economy last year; gradual lifting of restrictions was actually lifted which led to the growth in the economy. In addition to this, the festival season too had led to the resumption of economic activities that had started from October 2020 onwards. This had led the third and the fourth quarters of the financial year 2020-2021 to show meager but positive growth which ended India’s technical recession seen in decades.

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