India’s economic growth accelerates in Q1 2021, ahead of huge COVID-19 wave
NEW DELHI: India’s economic growth picked up between January and March from the previous three months, but economists became pessimistic about this quarter after a huge second wave of COVID-19 infections hit the country last month.
Gross domestic product rose 1.6 percent in January-March compared to the same period a year earlier, mainly on the back of growth in the manufacturing sector, data from the statistics ministry showed on Monday.
This compares to a revised growth of 0.5% in the previous three months and 1.0% according to a Reuters poll of economists.
India also revised its annual GDP estimates for the fiscal year, forecasting a contraction of 7.3 percent, down from its earlier estimate of -8.0 percent.
A slow vaccination campaign and local restrictions after a second massive wave of infections and deaths across the country hit economic activities such as retailing, transportation and construction, while putting millions of people at risk. unemployment.
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India recorded 28 million COVID-19 infections, behind only the United States, and 329,100 deaths on Monday, although the rise has started to slow.
Economists said the economy, which was facing a downturn even before the pandemic, could now see a collapse in consumer demand, which accounts for more than 55% of the economy, as incomes and jobs for consumers. households have declined.
Garima Kapoor, economist at Institutional Equities, Elara Capital Mumbai, said the March GDP figures reflected the impact of unlocking the economy before the second wave hit.
“The rebound in consumer spending would therefore be more gradual than the first wave, vaccination being the main driver.”
The central bank, which has kept monetary policy loose while increasing the liquidity of the economy, said last week that the outlook will depend on how quickly India can stop infections.
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Prime Minister Narendra Modi has been criticized for the slowness of his four-month vaccination campaign, which has vaccinated less than 4% of India’s 1.38 billion people.
Analysts warn that the slow rollout could pose medium-term risks to growth, especially if the country were to experience a third wave of COVID-19.
Unemployment hit a nearly one-year high of 14.7% in the week ending May 23, according to the Center for Monitoring Indian Economy, a private Mumbai-based think tank.