India’s economy returned to growth last quarter, ending a recession just in time to battle new challenges posed by a surge in coronavirus infections
India’s economy returned to growth last quarter, ending a recession just in time to battle new challenges posed by a surge in coronavirus infections.
Gross domestic product expanded 0.4% in the three months ended December after two consecutive quarters of declines, the Statistics Ministry said Friday. That was slower than the median forecast for a 0.6% expansion in a Bloomberg survey of 36 economists.
The yield on the benchmark 10-year bonds climbed five basis points before the data, amid a rout in debt markets, while the rupee weakened 1.4% Friday. Stocks plunged mirroring a global sell-off in risk assets sparked by surging U.S yields.
India became one of the few major economies to post growth in the last quarter of 2020, helped by a boost in government spending and the reopening of the economy, which is primarily driven by domestic consumption. Sustaining the recovery is tied to the nation’s ability to contain the Covid-19 outbreak, after an uptick in cases in the last few weeks raised the risk of renewed lockdowns.
Maharashtra, whose capital Mumbai accounts for 6% of the national economy, warned of lockdowns after the number of daily cases rose to almost 7,000 last week. India overall reported more than 16,000 new daily infections as of Friday, and is still home to the world’s second-biggest outbreak.
A recovery in growth will lower the pressure on the central bank, which did most of the heavy lifting in the past year through 115 basis points of interest-rate cuts and ensuring liquidity in the financial system. The government has since announced fiscal steps to support the economy, including a near-record borrowing in its latest budget this month.
“The infection caseload in some parts of the country is, however, again creeping up," Reserve Bank of India Governor Shaktikanta Das said Thursday. “We need to stay vigilant and steadfast, and on our toes."
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