HOW REAL IS THE RECOVERY?

Although it was expected that the GDP growth numbers for the second quarter of this fiscal year would read far better than the dismal -23.9 per cent seen in the first quarter, the actual numbers came in as a surprise to many.

- M.G. Arun

At -7.5 per cent, the economy is still in negative growth territory compared to a year ago, but the recovery from the depths to which it had plunged in Q1 is sharper than many analysts had expected, suggesting that the recovery may be taking place faster than expected. This is largely thanks to growth in the agriculture and electricity sectors and a rebound in manufacturing. In the second quarter (July to September) of this fiscal year, agriculture grew at 3.4 per cent, compared with 3.5 per cent in the second quarter of 2019-20, while electricity and other utility services grew at 4.4 per cent, compared with 3.9 per cent in the same period of the previous fiscal year. The industry sector, which includes manufacturing, contracted 2.1 per cent compared with 0.5 per cent growth a year ago. However, considering that this sector contracted 38 per cent in the first quarter of this fiscal year, this is a significant improvement.

Manufacturing grew 0.6 per cent in the second quarter of this fiscal year, compared with a 0.6 per cent contraction in the same quarter of the previous fiscal, driven by higher economic activity following the easing of lockdown restrictions as well as a favorable base effect. On the other hand, at 15.6 per cent, the trade, hotels, and transport segment registered the greatest contraction of all sectors in the second quarter. The overall services sector registered a contraction of 11.4 per cent in the quarter under review, against the 6.5 per cent growth in the second quarter of the previous fiscal year.