GBP/INR is declining in early trading on Thursday, slashing yesterday’s gains. Currently, one British pound buys 92.000 Indian rupees, down 0.17% as of 6:40 AM UTC. The pair just touched the lowest level since March 27, at 91.900.
Both the UK and Indian economies are struggling with the disastrous impact of the COVID pandemic, and both countries are trying to gradually ease lockdown restrictions.
The pound slightly increased yesterday after GDP data released by the Office for National Statistics (ONS) showed that the economy contracted in the first quarter but performed better than expected.
GBP: UK GDP to Tumble Up to 30% in Q2
However, later on Wednesday, the National Institute of Economic and Social Research (NIESR) and the Institute of Fiscal Studies (IFS) reported on the scale of the contraction in the second quarter, which discouraged pound investors.
The NIESR said that the UK GDP could be heading for a huge contraction of up to 30% in the three months to June.
Elsewhere, think tank IFS said that the scale of the contraction would be like nothing seen before.
IFS director Paul Johnson told BBC Radio 4:
“It is a mega-recession. It is a recession to end all recessions, in terms of its scale. It’s a very different kind of one to ones we have had in the past because it has resulted from a different response, government closing part of the economy down.”
Consequently, Johnson said that the route out should be different too, hinting that the economy might recover faster once the government lifts the restrictions.
The official data from the ONS showed that the UK economy contracted by 2% in the first three month year-on-year and tumbled 5.8% in March alone, which is the largest monthly decline.
UK Finance Minister Rishi Sunak admitted that the recession was significant. He told Sky News:
“We are living in a time of unprecedented economic uncertainty. What we are thinking about foremost at the moment is protecting people’s health.”
The pound has declined against an already weakening rupee. Yesterday, official data showed that India’s factory output dropped a record 16.7% in March.
