India’s economy expanded 1.6 per cent year on year between January and March, in a sign economic activity was recovering steadily before the country was battered by a second wave of coronavirus infections in April.

The expansion followed 0.5 per cent year-on-year growth between October and December, when Indians began to cautiously venture out for the traditional festive season after a draconian lockdown during the spring and summer last year.

“The overall numbers do signify a steady revival of demand,” KV Subramanian, the government’s chief economic adviser, said after the data were released on Monday. But Subramanian conceded that “some of the momentum that was gathered was affected by the second wave of the pandemic”. At least 170,000 have died in the past two months as cases have surged again.

Over the full financial year from April 2020 to March 2021, India’s gross domestic product narrowed 7.3 per cent, its worst performance in four decades. Still, the decline was less severe than some had feared after highly restrictive lockdown measures last year led to a 24 per cent contraction in economic output between April and June 2020.

Daily new Covid-19 infections had fallen steadily from September 2020 to the end of February, fuelling a pick-up in social and economic activity amid hopes that India had seen the worst of the virus.

“The economy was normalising before the second wave hit,” said Aurodeep Nandi, India economist for Nomura, the Japanese bank.

Growth between January and March was driven by a 28 per cent year-on-year increase in government consumption and a 10.9 per cent pick-up in investment. But private consumption growth was more restrained, rising 2.7 per cent year on year.

The quarter also featured a rebound in construction activity, which grew 14 per cent year on year; manufacturing, which expanded 7 per cent; and agriculture, which grew 3.1 per cent.

But just as Prime Minister Narendra Modi’s government was declaring victory over the virus, the second wave was building and by early April India’s metropolitan hospitals were overwhelmed with critically ill patients.

Vast swaths of the country are under fresh curbs and the number of new daily cases has already dropped sharply. Businessmen and analysts say this year’s localised lockdowns are less severe and better planned than the hastily imposed lockdown last year, when all movement and economic activity was suspended with four hours’ notice.

“Damage from the current round of restrictions has not been as severe as last year and India appears to be over the worst of the latest outbreak,” wrote Shilan Shah, an India economist at Capital Economics, in a research note.

India’s largest companies, such as Tata Group and Reliance Industries, are working aggressively to vaccinate their employees, aided by New Delhi’s policy of permitting 25 per cent of the country’s vaccine output to be sold to private hospitals for resale to the corporate sector and others who can afford to pay.

Analysts predict India’s improved vaccination rollout and strong global growth will help propel a stronger economic pick-up from the third quarter this year.