People shop in a market ahead of Diwali, the Hindu festival of lights, in New Delhi. Photo: AFP / Money Sharma

India Thursday unveiled fresh measures to revive the economy.  The Reserve Bank of India said Asia’s third largest economy is likely to have gone into a technical recession for the first time in its history with two successive quarters of GDP contraction.

Finance Minister Nirmala Sitharaman announced increased spending on infrastructure, job creation, small and medium-sized enterprises, real estate, exports and agriculture.

The economy, which posted slackening growth of 4.2% in the year to March 31, slowed after India imposed a two-month lockdown from March 25. Sporadic and localized lockdowns in the following months severely disrupted economic activity, purchasing power and employment.

The latest dozen measures amount to 2.65 trillion rupees ($35.5 billion). Stimuli extended by the government so far add to about 30 trillion rupees, or 15% of the Gross Domestic Product, the finance minister said.

India’s economy contracted by 23.9% in the quarter ended June 30, and could shrink by 8.6% in the second quarter, the RBI said. India is likely to announce the second quarter figures on November 30.

Still, the finance minister exuded optimism and held out hope.

Moody’s Investors Service softened its negative outlook for the Indian economy, trimming its forecast of growth shrinking by 8.9% in the full year to March 31, compared with its earlier forecast of a 9.6% contraction.

Sitharaman also cited a pick-up in energy consumption, freight tonnage, bank credit, foreign direct investment inflows and surging equities to an all-time high.

Nifty and Sensex crossed their lifetime highs earlier this week, helped by surge in inflow of cheap overseas money. Costs of borrowing money across developed economies is close to nothing as governments keep rates low and print more currency to help lift growth.

Sitharaman offered incentives to companies that gave more employment. More than 95% of the companies in the formal sector and 65% employees will be covered by the government incentives. The finance minister said the government will give guaranteed credit support for 26 stressed sectors.

“It’s a sniper approach to address specific issues rather than a carpet bombing one,’’ T.V. Narendran, president-designate of the Confederation of Indian industries said while commending her focused strategy.

The government on Wednesday extended Production Linked Incentives to another 10 sectors including telecom, automobile, pharmaceuticals, electronic and technology products, white goods, specialty steels, and advanced cell chemistry batteries.

“These measures will help boost employment generation, provide additional credit to the stressed sectors, multiplier effects on undertaking additional capital expenditure and spending for the real estate sector and more spending towards the rural economy,’’ said Madan Sabnavis, chief economist with CARE Ratings in Mumbai.

The finance minister extended 180 billion rupees support for the launch and completion of three million homes, besides extending income tax breaks for home buyers and developers. This would create almost eight million jobs, and increase demand for steel and cement, she said.

“The emphasis on key sectors with high elasticity such as construction and real estate along with measures to provide adequate credit will kick-start investments and job creation,’’ Narendran said. “Downstream impact on sectors such as steel and cement can be considerable going forward. ‘’

The government will help farmers with 650 billion rupees to ensure a regular supply of fertilizers. Agriculture has been the savior of the economy by providing employment and growth through the current financial year and lockdown during the pandemic. The government also proposes to give 100 billion rupees to help generate jobs in rural areas.

The stimulus is being described by some as a good gesture for the main Hindu festival of Diwali, or festivals of lights, on Saturday.