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India's recovery to take time after economy shrinks 24% in June quarter – The Guardian

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By Manoj Kumar

NEW DELHI (Reuters) – India’s economy shrank by nearly a quarter in April-June, much more than forecast and pointing to a longer than previously expected recovery with analysts calling for further stimulus.

Consumer spending, private investments and exports all collapsed during the world’s strictest lockdown imposed in late March to combat the COVID-19 pandemic and India – the world’s fastest-growing large economy until a few years ago – now looks to be headed for its first full-year contraction since 1980.

Gross domestic product shrank by a record 23.9% in April-June from a year earlier, official data showed on Monday, against a Reuters poll forecast for an 18.3% contraction.

Krishnamurthy Subramanian, chief economist at the Ministry of Finance, said India’s economy was set for a “V-shaped” recovery and should perform better in the coming quarters as indicated by a pickup in rail freight, power consumption and tax collections.

Some private economists, however, said the fiscal year that began in April could see a contraction of nearly 10%, the worst performance since India won independence from British colonial rule in 1947, and likely to push millions more into poverty.

“Given the limited fiscal space and the need to stimulate a more durable growth, the growth recovery will be gradual and is likely to continue into 1H FY22,” said Suvodeep Rakshit, senior economist at Kotak Institutional Equities, Mumbai.

Consumer spending – the main driver of the economy – dropped 31.2% year-on-year in April-June compared to a 2.6% fall in the previous quarter, data showed, while capital investments were down 47.9% compared to a 2.1% rise in the previous quarter.

Prime Minister Narendra Modi announced a $266 billion stimulus package in May, including credit guarantees on bank loans and free food grains for poor people, but consumer demand and manufacturing have yet to recover.

The Reserve Bank of India, which has reduced the benchmark repo rate by a total of 115 basis points since February, is expected to cut interest rates to boost growth after keeping them on hold this month amid rising inflation.

VIRUS CASES ON RISE

The coronavirus has been spreading in India faster than anywhere else in the world, with more than 3.6 million people already infected and a death toll of over 64,400.

Continuing restrictions on transport, educational institutions and restaurants have hit manufacturing, services and retail sales, while keeping millions of workers out of jobs.

Manufacturing has already entered recession as output fell 39.3% in April-June after falling 1.4% in the previous quarter, and construction and trade services plunged by around 50%.

With an annual growth of 3.4% in the April-June quarter, the farm sector, which accounts for 15% of economic output, offered some hope the rural economy will be able to support millions of migrant workers who have returned to their villages.

Still, Rupa Rege Nitsure, group chief economist at L&T Financial Holdings, said the government will have to take more steps to boost the economy overall.

“Unless the central and state governments focus on re-starting the economic machine completely, the real process of repair and reconstruction will not gain momentum,” she said.

(Additional reporting by Nallur Sethuraman; Editing by Toby Chopra, Barbara Lewis and Susan Fenton)

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How will the U.S. election impact the Canadian economy? – BNN Bloomberg

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How will the U.S. election impact the Canadian economy?  BNN Bloomberg

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Trump and Musk promise economic 'hardship' — and voters are noticing – MSNBC

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Trump and Musk promise economic ‘hardship’ — and voters are noticing  MSNBC

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Economy stalled in August, Q3 growth looks to fall short of Bank of Canada estimates

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OTTAWA – The Canadian economy was flat in August as high interest rates continued to weigh on consumers and businesses, while a preliminary estimate suggests it grew at an annualized rate of one per cent in the third quarter.

Statistics Canada’s gross domestic product report Thursday says growth in services-producing industries in August were offset by declines in goods-producing industries.

The manufacturing sector was the largest drag on the economy, followed by utilities, wholesale and trade and transportation and warehousing.

The report noted shutdowns at Canada’s two largest railways contributed to a decline in transportation and warehousing.

A preliminary estimate for September suggests real gross domestic product grew by 0.3 per cent.

Statistics Canada’s estimate for the third quarter is weaker than the Bank of Canada’s projection of 1.5 per cent annualized growth.

The latest economic figures suggest ongoing weakness in the Canadian economy, giving the central bank room to continue cutting interest rates.

But the size of that cut is still uncertain, with lots more data to come on inflation and the economy before the Bank of Canada’s next rate decision on Dec. 11.

“We don’t think this will ring any alarm bells for the (Bank of Canada) but it puts more emphasis on their fears around a weakening economy,” TD economist Marc Ercolao wrote.

The central bank has acknowledged repeatedly the economy is weak and that growth needs to pick back up.

Last week, the Bank of Canada delivered a half-percentage point interest rate cut in response to inflation returning to its two per cent target.

Governor Tiff Macklem wouldn’t say whether the central bank will follow up with another jumbo cut in December and instead said the central bank will take interest rate decisions one a time based on incoming economic data.

The central bank is expecting economic growth to rebound next year as rate cuts filter through the economy.

This report by The Canadian Press was first published Oct. 31, 2024

The Canadian Press. All rights reserved.

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