Australia in first recession for nearly 30 years and Indian GDP shrinks by 23.9 per cent

Finance Minister Mathias Cormann

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Australia's economy has plunged into its first recession in nearly 30 years, as it suffers the economic fallout from the covid-19. Gross domestic product (GDP) shrunk 7% in the April to June quarter compared to the previous three months. This is the biggest fall since records began back in 1959 and comes after a fall of 0.3% in the first quarter. An economy is considered to be in recession if it sees two consecutive quarters of negative growth.

Australia was the only major economy to avoid a recession during the 2008 global financial crisis mainly due to demand from China for its natural resources. At the start of this year, the economy was hit by falling economic growth due to an extreme bush fire season and the early stages of the covid-19 outbreak.

More recently the shutdowns of businesses across the country have taken their toll, despite measures by the government and central bank to support the economy. This is the worst economic growth in 61 years due to a severe contraction in household spending on goods and services. Australia last fell into recession in mid-1990 which ran into late 1991.

But the covd-19 pandemic has been a major blow to the Australian economy, although the figure is slightly better than the 8% fall Australia's reserve bank had earlier forecast. Despite the severe drop in economic activity, Australia is doing better than most other advanced economies that have experienced bigger downturns.

India’s Gross Domestic Product (GDP) declined by 23.9 per cent between April and June, official figures revealed. India’s Ministry of Statistics and Programme Implementation on Monday revealed the construction sector took the steepest hit, followed by trade, hotel and transport sector. The agriculture sector was the only sector that reported positive growth in the first quarter of India’s financial year.

India’s Gross Domestic Product (GDP) declined by 23.9 per cent between April and June. Source Indian Ministry of Statistics and Programme Implementation

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Sectorial break-up

• Construction contracted 50.3%.

• Trade, hotel, transport, communication contracted 47%.

• Manufacturing contracted 39.3%.

• Mining sector contracted 23.8%.

• Financial services sector contracted by 5.3%.

• Public administration, defense and other services contracted by 10.3%.

• The agriculture sector grew at 3.4%.

In May, the Indian Prime Minister announced a stimulus package worth $400 billion (AUD) calling it Atma Nirbhar Bharat Abhiyan or Mission self-reliant India. The Indian PM said the package was aimed towards becoming economically self-reliant and depend less on imports. He stressed on the importance of buying local and said it was time to be vocal about local. But experts suggest the Indian government’s response has not been sufficient to address the economic crisis.

Gaurav Datt, an Economist and the Director of Centre for Development Economics and Sustainability said, government’s response to the pandemic has been very disappointing and disheartening. Until the government works out a mechanism to put more money into people’s pocket, it will be difficult to increase the demands in the sectors which have seen such a steep fall

The US economy, the world's biggest, shrank 9.5% between April and June while the UK's shrank by 20.4% pushing it into recession as well. France's economy fell by 13.8% and Japan's by 7.6%.