India’s GDP contracts 7.3% in FY21
Economy showed momentum with 1.6% growth in Q4 before surge in Covid cases
NEW DELHI: India’s GDP grew by 1.6% in the January to March quarter (Q4 FY21) but contracted by 7.3% in the entire financial year, government data released on Monday showed.
A continuing fall in domestic consumption due to Covid-19 pandemic was behind the sluggish pace.
Real GDP or gross domestic product (GDP) at constant (2011-12) prices in 2020-21 is estimated to attain a level of ₹135.13 lakh crore as against the first revised estimate of GDP for 2019-20 of ₹145.69 lakh crore.
The fourth quarter growth was better than the 0.5% expansion in the previous Octoberdecember quarter of 2020-21.
The economy expanded faster than expected last quarter before a resurgent coronavirus pandemic unleashed a new wave of challenges.
The gross domestic product (GDP) had expanded by 3% in the corresponding Januarymarch period of 2019-20, according to data released by the National Statistical Office (NSO).
“The growth in GDP during 2020-21 is estimated at minus 7.3% as compared to 4% in 2019-20,” said NSO.
“GDP at constant (2011-12) prices in Q4 of 2020-21 is estimated at ₹38.96 lakh crore as against ₹38.33 lakh crore in Q4 of 2019-20, showing a growth of 1.6%.”
GDP is derived as the sum of the gross value added (GVA) at basic prices plus all taxes on products less all subsidies on products. The total tax revenue used for GDP compilation includes non-gst revenue and GST revenue.
“The measures taken by the government to contain spread of the Covid-19 pandemic have had an impact on economic activities as well as on data collection mechanisms,” said a statement issued by the NSO.
The NSO had projected a GDP contraction of 7.7% in 2020-21 in its first advance estimates of national accounts released in January this year. The NSO, in its second revised estimates, had projected a contraction of 8% for 2020-21.
The Paris-based Organization for Economic Cooperation and Development, which by far had the most optimistic forecast of 12.6% growth for India in its interim economic outlook in March, now sees a relatively modest yet world-beating 9.9% expansion.
The downgrades are a message to not take the economy’s recovery for granted. Economists say the relaxation of restrictions across states will determine the strength of the rebound, while the willingness of consumers to spend—as they did last year when lockdown curbs were lifted —will also be key. “Activity will improve only when sufficient number of people are vaccinated,” said Devendra Kumar Pant, chief economist at India Ratings and Research, the local unit of Fitch Ratings. “So the risk as of now is the demand.”
While virus cases have started receding and some parts of the country look set to reopen in June, consumers are unlikely to spend freely, given the economic uncertainties and unemployment at its highest level in a year. The government on Sunday expanded an emergency credit program to airlines and hospitals to cushion them from the impact of the pandemic.
The central bank, which will review interest rates later this week, has kept monetary policy loose and injected liquidity into the system to support growth.