Economy weighed down by Covid-19 national lockdown
Amid Covid pandemic, Indian economy has shrunk by minus 7.3 per cent in the fiscal year 2020-21, which is the worst ever performance in over four decades. The fourth quarter of the fiscal showed a meager rise of 1.6 per cent.
This is the first full-year contraction in the last 40 years since 1979-80, when Gross Domestic Product (GDP) had shrunk by 5.2 per cent. Indian economy had recorded an 11-year-low GDP growth rate of four per cent in 2019-20, down from the previous 6.5 per cent. The fiscal deficit stood at 9.3 per cent of the GDP in the last fiscal, better than 9.5 per cent projected in the revised estimates in the Union Budget in February.
The National Statistical Office (NSO) released the GDP growth estimates for the fourth quarter (January-March) 2020-21, as well as the provisional annual estimates for the year 2020-21.
According to data released by the NSO, India’s real GDP contracted to Rs 135 lakh crore in FY21 (2020-21) from Rs 145 lakh crore at the end of March 2020.
“The growth in GDP during 2020-21 is estimated at -7.3 per cent as compared to 4.0 per cent in 2019-20. The GDP at current prices in the year 2020-21 is estimated to attain a level of Rs 197.46 lakh crore, as against the first revised estimates of Rs 203.51 lakh crore in 2019-20, showing a change of -3.0 per cent as compared to 7.8 per cent in 2019-20.
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 per cent,” the Ministry of Statistics & Programme Implementation said in a press release.
To regain Rs 145 lakh crore size, the economy will have to grow by 10-11 per cent in the current 2021-22 fiscal but the outbreak of the second wave of Covid-19 infections last month has disrupted the momentum of economic activity and many expect the GDP may not touch double-digit growth rate despite the low base.
The GDP numbers released by the NSO on Monday reflected the delicate state of the nation’s economy and is all the more glaring since the Centre had begun the ‘Unlock’ process from July 2020 onwards after imposing a nationwide lockdown in March 2020, which had lasted till June 2020. The fourth quarter numbers are all the more poor as during the January-March period, all sectors had been completely opened and the situation was near normal, yet a 1.6 per cent growth during the fourth quarter of FY21 shows all is not well with the fiscal health of the nation. The economy had grown by 4 per cent in the previous 2019-20 fiscal. The GDP expanded by 8.3 per cent in 2017-18 before slipping to 7 per cent in the following fiscal and to 6.1 per cent in 2018-19.
Even though daily Covid-19 cases have come down from a peak of over 4 lakh to 1.5 lakh a day, a crash in consumer demand — constituting over 55 per cent of the economy — and unemployment soaring to near one-year high of 14.73 per cent pose fresh challenges. While most analysts had projected a double-digit growth in FY22, albeit on a lower base, the second wave of Covid-19 pandemic and lockdowns imposed by State Governments to control the surge in cases has led to revisions in growth estimates. For the first quarter of 2021-22, median forecasts by rating agencies and major economists stand at 21.6 per cent, which is lower than 23 per cent predicted earlier. State-wise lockdowns and subsequent shutting down of the economy, although partially, has forced millions out of work and several small businesses to put down the shutters.
In 2019-20, the GDP had shown a poor growth of four per cent, an 11-year low, mainly due to contraction in secondary sectors like manufacturing and construction. During the first quarter of 2020-21, India’s GDP had shrunk by 24.38 per cent, hit mainly by the Covid-19 pandemic.
According to the NSO data, gross value added (GVA) growth in the manufacturing sector accelerated to 6.9 per cent in the fourth quarter of 2020-21 compared to a contraction 4.2 per cent a year ago. Farm sector GVA growth was down at 3.1 per cent, compared to 6.8 per cent in the corresponding period of 2019-20. Construction sector GVA grew by 14.5 per cent from 0.7 per cent growth earlier. Mining sector shrank by 5.7 per cent, as against a contraction of 0.9 per cent a year ago. Electricity, gas, water supply and other utility services segment grew by 9.1 per cent in the fourth quarter, against 2.6 per cent expansion a year ago. Similarly, trade, hotel, transport, communication and services related to broadcasting contracted by 2.3 per cent in the fourth quarter from 5.7 per cent growth earlier.
Financial, real estate and professional services grew by 5.4 per cent in Q4 FY21 from 4.9 per cent growth. Public administration, Defence and other services growth fell to 2.3 per cent during the quarter under review, from 9.6 per cent a year earlier.
Releasing the revenue-expenditure data of the Union Government for 2020-21, the Controller General of Accounts (CGA) on Monday said the revenue deficit at the end of the last fiscal was 7.42 per cent. In absolute terms, the fiscal deficit works out to be Rs 18,21,461 crore (provisional). Total expenditure incurred by the Central Government was Rs 35,11,181 crore (101.76 per cent of corresponding RE 2020-21). Out of the total amount, Rs 30,86,360 crore was on the revenue account and Rs 4,24,821 crore was on capital account.