India’s Gross Domestic Product (GDP) contracted 7.3 percent in the Covid-19-battered financial year 2020-21 (FY21), as compared to 4 percent growth in the previous financial year 2019-20 (FY20).
The country’s real GDP or GDP calculated at prices adjusted for inflation, for the full year 2020-21 was estimated to be Rs 135.13 lakh crore or $1.86 trillion, as compared to the first revised estimate of GDP for FY20 of Rs 145.69 lakh crore or $2.01 trillion. The growth in GDP during 2020-21 is estimated at -7.3 percent as compared to 4.0 percent in 2019-20. This is the first yearly economic contraction in 40 years.
During the January-March quarter or fourth quarter (Q4) of FY21, GDP grew by 1.6 percent as compared to the same period the previous year. GDP at Constant (2011-12) Prices in Q4 of 2020-21 is estimated at Rs 38.96 lakh crore, as against Rs 38.33 lakh crore in Q4 of 2019-20, showing a growth of 1.6 percent, according to the Ministry of Statistics & Programme Implementation (MoSPI) release.
Economists say the GDP figure in Q4 of FY22 was better than expected and helped blunt the full-year contraction.
“Both headline GDP and GVA growth surprised positively in Q4, thereby reducing the extent of full-year contraction to 7.3% and 6.2% vis-à-vis the NSO’s second advance estimate of -8.0% and -6.5% respectively. On the supply side, overall growth momentum in Q4 was led by industry vis-à-vis services, a trend which has been in play post the nationwide lockdown in Q1 FY21. On-demand side, support from government consumption and investments supported the overall growth. While export performance improved, the net impact was offset by higher growth in imports,” said Vivek Kumar, Economist, QuantEco Research.
Growth in the fourth quarter was driven primarily by business investment and a surge in government spending. Consumption spending also gained traction this quarter, suggesting a possible improvement in confidence. Exports also did exceptionally well. Evidently, the economy was gaining momentum before the second wave hit us, said Rumki Majumdar, Economist, Deloitte India.
The economy is likely to grow in double digits owing in the first quarter of FY22 owing to the low-base effect of last year because of the nationwide lockdown. Economists also expect the devastation of the second wave in 2021-22 to be limited to the April-June quarter.
“With a majority of the states imposing strict lockdowns in April and May, we expect the economic harm of the second wave to remain contained to the April-June quarter. This is because the current infection wave seems to have peaked and any subsequent waves may have a diminishing impact on the economy, as is seen elsewhere,” Majumdar further added.
Economic activity is likely to pick up rapidly in the second half of FY22. Factors such as falling infections, a potential increase in the pace of vaccination, and the oncoming festivals in the following months will likely boost consumer and investment spending owing to strong pent-up demand.
The economy grew 0.4 percent YoY in the October-December or third quarter (Q3) of FY21 after declining for two preceding quarters consecutively. Before Q3, the country’s GDP declined by 7.3 percent in the July-September quarter (Q2) and by 24.4 percent during the April-June (Q1) quarter on account of the nationwide lockdown necessitated by the first wave of Covid-19 pandemic.
A nationwide lockdown during the first wave of pandemic last year saw the economy entering into a technical recession owing to two consecutive quarters of degrowth in Q2 and Q3. However, unlocking of the economy in subsequent months led to a recovery in subsequent quarters.
The per capita income in real terms during the financial year 2021 was estimated at Rs 85,929 as compared to Rs 94,566 in the year 2019-20, slipping 9.1 percent on a yearly basis. Per capita income is the average income earned per person in a given year during a specific year.
