Indian economy grew a 1.6 per cent in the January-December quarter, data released by the National Statistical Organisation (NSO) showed on Monday. India’s gross domestic product (GDP) growth has been severely affected by coronavirus pandemic during the fiscal ended in March. The economy contracted 7.3 per cent in the financial year 2020-21. It was better than what Reserve Bank of India and the Ministry of Statistics and Programme Implementation had forecast earlier.
The gross value added (GVA) in the March quarter stood at 3.7 per cent. For FY21, GVA declined 6.2 per cent. Only two sectors bucked the trend of negative GVA growth — Agriculture, Forestry and Fishing (which rose 3.6%) and Electricity, Gas, Water Supply and other Utility Services (up 1.9%). GVA from Trade, Hotels, Transport, Communication and Broadcasting-related services recorded the sharpest decline of 18.2%, followed by Construction (-8.6%), Mining and quarrying (-8.5%) and Manufacturing (-7.2%).
India’s GDP growth witnessed a massive contraction of 24.4 per cent in the first quarter amid COVID-19 pandemic-led nationwide lockdown during the first quarter of FY21. During the July-September quarter, the GDP decline narrowed to 7.5 per cent. However, the country exited the technical recession phase when GDP growth had improved to 0.4% in the October-December quarter of 2020-21.
“The Indian economy grew at a robust pace of 1.64% in March quarter, outpacing our expectations, and 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 fiscal deficit reported at 9.3 per cent of GDP in 2020-21, down from revised estimate of 9.5 per cent, according to the official data.
“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,” the economist from Deloitte India added.
On India’s GDP growth in FY 22, Rumki Majumdar mentioned,“Economic activity will pick up rapidly in the second half of the FY. 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 Q4 FY21 GDP growth at 1.6% year-on-year came in a tad better than expected, buoyed largely by upside surprises in manufacturing, utilities and construction activities. The full year contraction of 7.3% for FY21 GDP was also modestly better than expectation. We recognize that GDP prints for Q1FY22 will also likely come in strong in double digits given the markedly favourable base reflecting last year’s abrupt nation-wide lockdown and major loss of economic activities,” Siddhartha Sanyal, chief economist and head – Research, Bandhan Bank said.