India's economy exits recession, grows 0.4% in October-December quarter

India's economy grew 0.4 per cent year-on-year in the final quarter of 2020, official data showed Friday, ending its first recession since independence as easing coronavirus restrictions sparked a modest recovery.

The country has struggled to claw back lost ground after a stringent, months-long lockdown caused the labour market to collapse and the economy to contract by nearly a quarter between April and June.

The country entered a "technical recession" last year for the first time since gaining independence after registering two successive quarters of contraction. The government now estimates annual GDP will fall eight per cent in 2020-21.

The latest figures, which fell shy of the expectations of a Bloomberg survey of economists pegging growth at 0.5 per cent for the December-ended quarter, will nonetheless bring some cheer to Prime Minister Narendra Modi's beleaguered government.

Passenger vehicle sales in the bellwether automobile sector increased by over 11 per cent in January compared to a year earlier, according to industry figures.

Key sectors such as construction and manufacturing also showed an improvement compared to the same quarter last year, Friday's data revealed.

Restrictions have been relaxed as coronavirus infections have slowed in the country of 1.3 billion in recent weeks.

The government has forecast economic growth of 11 per cent in the 2021-22 financial year, in line with the International Monetary Fund's prediction of 11.5 per cent.

But experts have warned that India, whose tally of 11.1 million infections is second only to the United States, could see another wave and be hit by new variants of the virus, as has happened in Brazil, Britain and South Africa.

The financial and film capital of Mumbai imposed fresh pandemic restrictions on Monday, banning religious gatherings and political rallies, after infections spiked to levels last seen in October.

New Delhi is hoping that the economy will get a further boost from a massive vaccination drive that kicked off last month but which is already running behind schedule, with 12.2 million shots administered so far to health workers and frontline staff.