Economy Contraction Likely To Happen By 12% In Q1

• ByStartupStory     |    June 17, 2021

In the months of April and May, Lockdown had been imposed in several states to contain the spread of the second wave of the deadly COVID-19 pandemic that likely led to the economy contracting 12 percent in the June quarter as against 23.9 percent contraction in the same quarter in 2020. However, 2.5 months of unplanned lockdown announced by the center had its worst contraction on the economy on record in FY21 at 7.3%. Four-hour notice had crippled the economy in the first quarter with a massive 23.9 percent contraction, which improved to -17.5 percent in the second quarter.

But the economy had shown a sharp V-shaped recovery from the second half when it posted a 40-bps positive growth and in Q4 clipping at 1.6 percent, containing the overall contraction at 7.3 percent for the year. Swiss brokerage UBS Securities India says this 12-percentage point contraction will have the economy missing a sharp V-shaped recovery this time around, unlike seen last year after the national lockdown was lifted, as consumer sentiment remains very weak this time around as people are more worried about the pandemic than last year.

The economist at the Swiss brokerage, Tanvee Gupta Jain, says the indicator suggests that economic activity has contracted an average of 12 percent in the June 2021 quarter as compared to June 2020 quarter which was at 23.9 percent. She further said we expect a gradual recovery this time, as consumer sentiment remains weak on pandemic-related uncertainties.

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