With all of the first quarter of the 2020-21 year being during the lockdown, the economy sharply contracted with the GDP in the April-June quarter contracting by 23.9%, as opposed to a growth of 5.2% in the corresponding quarter last year.
While the pandemic caused historic GDP contractions in economies around the world, the situation in India has been made worse by more than 78,000 new infections a day and total cases topping 35 lakh - behind only the United States and Brazil.
A news report by PTI said that the manufacturing shrank 39.3 %, construction contracted 50.3 %, mining output fell 23.3 % and the electricity and gas segment dropped 7 % in the same period. A shrinking economy means job creation is not possible; also, existing jobs and incomes get severely impacted.
Some private economists said the fiscal year that began in April could see a contraction of almost 10 percent, the worst performance since India won independence from British colonial rule in 1947.
The positive news is that the annual growth of the farm sector stood at 3.4 per cent in the April-June quarter, giving some hope that the rural economy will be able to support millions of migrant workers who have returned to their villages during the lockdown period.
"After a decline of 23.9 per cent real GDP growth in Q1, now the question arises on how much growth will decline in subsequent quarters".
During April-June, agriculture was the lone bright spot, growing by 3.4 per cent.
He expressed surprise at the 10.3% contraction in public administration, defense and other services "because the government sector is the one which was clearly supposed to be functioning during [the lockdown period]".
Reacting to the data, chief economic adviser (CEA) K V Subramanian tried to put a spin on it.
The "upticks that became visible in May and June after the lockdown was eased in several parts of the country appear to have lost strength in July and August, mainly due to reimposition or stricter imposition of lockdowns, suggesting that the contraction in economic activity will likely prolong into Q2 [the quarter ending in September]", the bank said. "Which is what we are going through", he said.
The revelation evoked a sharp reaction from the opposition leaders in India with many targeting the flawed economic policies and inept handling of the economy by the central government. Many economists believe Prime Minister Narendra Modi's demonetization of currency in 2016 and a hasty rollout of a goods and services tax inflicted blows to manufacturing. Areas most affected by the virus remain under lockdown.
And that it anticipates the economy to stage a gradual recovery in the coming quarters on account of reforms, the Rs 20 lakh crore stimulus package and measures taken by the Reserve Bank.
"With a view to contain spread of the COVID-19 pandemic, restrictions were imposed on the economic activities not deemed essential, as also on the movement of people from 25 March, 2020".
Acuite Ratings & Research Group CEO Sankar Chakraborti said: "Expectedly, government expenditure has increased by 16.5 per cent, pulling up its share in overall GDP to 18 per cent but its ability to offset the massive decline in consumption is limited".