2020.05.2916:13:00UTC+00India Economic Growth Slows Sharply On Covid-19

India's economic growth slowed sharply in the three months to March, partially reflecting the coronavirus-triggered country-wide lockdown that began towards the end of the quarter, official data showed on Friday.

Gross domestic product grew 3.1 percent year-on-year compared to 5.7 percent in the same quarter a year ago, figures from the statistics ministry showed.

The latest growth rate is reportedly the lowest in at least eight years, but was better than the 2.1 percent economists had forecast. The December quarter growth was revised lower to 4.1 percent from 4.7 percent.

The ministry also lowered its growth figure for the fiscal year 2019-20 to 4.2 percent from 5 percent estimated earlier. The latest growth is reportedly the weakest in 11 years. In the fiscal year 2018-19, the Indian economy had grown 6.1 percent. In the March quarter, manufacturing shrunk for a third straight quarter, down 1.4 percent year-on-year, and construction decreased 2.2 percent.

Farm production grew 5.9 percent and mining and quarrying output increased 5.2 percent. Utility sector output grew 4.5 percent after a decline in the previous quarter. In the services group, output grew 2.6 percent in the trade, hotels, transport and communication segment, and rose 2.4 percent in the financial services sector. India is still battling a severe spread of the coronavirus, or Covid-19, especially in its commercial capital Mumbai. The country went into a total lockdown, one of the most stringent, from March 25.

The government began easing the lockdown restrictions from May 18 in areas where the number of cases is less.

Household consumption and investment have been severely hurt as economic activity came to a standstill.

Economists are looking forward to significantly worse figures for the second quarter as the country remained in total lockdown throughout April and during the first half of May. The central bank has cut interest rates twice this year and the RBI governor has warned that growth is likely to be in negative territory in the 2020-21, which would be the first contraction in four decades.

The RBI expects some recovery in the second half of the fiscal year. The RBI maintained its accommodative stance after it cut the repo rate in a surprise move on May 22.

Goldman Sachs reportedly predicted a 5 percent GDP contraction for the 2020-21 fiscal year, which would be as deep as compared to the deepest recession India has witnessed since 1979.

"Further ahead, timely and large stimulus would have left households and firms in good shape when they emerged from the lockdown, which would have aided the economic recovery," Capital Economics economist Shilan Shah said.