GDP grows 1.6% in Q4, but contracts 7.3% in FY21

GDP grows 1.6% in Q4, but contracts 7.3% in FY21

India’s gross domestic product (GDP) increased by 1.6% in the January-March quarter of fiscal year 2020-21, but contracted by 7.3% for the entire fiscal year, according to government figures released on Monday.

Since 1979-80, when the Indian economy shrank by 5.2%, this is the first full-year contraction in the last four decades. This is also India’s second consecutive quarter of growth since emerging from a rare recession.

India’s GDP increased by 3% in the fourth quarter of FY20, bringing the overall growth rate to 4%, an 11-year low.

The manufacturing sector’s gross value added (GVA) growth surged to 6.9% in the fourth quarter of 2020-21, compared to a decrease of 4.2% a year ago, according to statistics from the National Statistical Office.

GVA growth in the agricultural industry was 3.1% in 2019-20, compared to 6.8% in the previous year.

GVA in the construction sector increased by 14.5 %, up from 0.7 % previously. The mining industry shrank by 5.7%, compared to 0.9% a year ago.

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In the fourth quarter, the electricity, gas, water supply, and other utility services segment expanded by 9.1%, compared to 2.6% growth a year ago.

Similarly, after growing by 5.7% in the previous quarter, trade, hotel, transportation, communication, and broadcasting services shrank by 2.3% in the fourth quarter.

Financial, real estate, and professional services expanded by 5.4 percent in the fourth quarter of FY21, up from 4.9 percent in the previous quarter.

Growth in public administration, defence, and other services fell to 2.3 percent in the current quarter, down from 9.6 percent a year ago.

“Real GDP, or Gross Domestic Product (GDP) at Constant (2011-12) Prices, is now expected to reach 135.13 trillion in 2020-21, compared to 145.69 trillion in the First Revised Estimate of GDP for 2019-20, announced on January 29, 2021. GDP growth in 2020-21 is expected to be -7.3 percent, down from 4.0 percent in 2019-20 “In a statement, the Ministry of Statistics and Programme Implementation said.

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“GDP at constant (2011-12) prices is anticipated to be Rs 38.96 trillion in Q4 2020-21, up from Rs 38.33 trillion in Q4 2019-20, indicating a 1.6 percent increase.”

The government’s efforts to stem the pandemic’s spread, according to the statement, have had an impact on economic activity as well as data collection procedures.
The economy will need to grow by 10-11 percent in the current fiscal year 2021-22 to regain its Rs 145 trillion size, but the outbreak of the second wave of COVID infections last month has disrupted economic activity, and many analysts believe the GDP will not reach double digits despite the low base.

GDP is calculated as the sum of gross value added (GVA) at basic prices plus all product taxes minus all product subsidies. Non-GST and GST revenue are included in the overall tax revenue used to calculate GDP.

The GST compensation amount for FY22 at the Centre should be greater than the anticipated Rs 1.58 lakh crore: Opp-ruled states

As of Monday, India had registered 28 million COVID-19 infections, second only to the United States, and 329,100 deaths, albeit the rate of increase, has slowed.

Manufacturing, construction and finance, real estate, and other sectors showed signs of improvement in Q4FY21, indicating that the economy is on the mend for FY22. However, growth may be stifled if the second wave results in the closure of the services sector in particular.

India needs continued structural reforms to boost growth

India needs continued structural reforms to boost growth

The UN report conveyed the hope that mixing fiscal stimulus with changes in the financial sector would help boost consumption.

The World Economic Situation and Prospects 2020 (WESP) survey also lowered India’s GDP growth forecast while expressing hope that mixing fiscal stimulus with changes to the financial sector would help boost demand.

Concerning a sharp economic slowdown from 6.8% in 2018 to 5.7% in 2019, India has committed to an ambitious fiscal expansion to complement the already loose monetary policy of the country.

 

The data relating to India, however, has been revised to 5 percent for the current fiscal year and 5.8-5.9 percent for the next financial year, said Nagesh Kumar, Head of the UN Economic and Social Commission

While presenting the report, he said the WESP GDP forecast did not take into account the latest growth figures released by the National Statistical Office of India (NSO).

The report, he said, was calculated in October 2019 and the advanced growth estimates of NSO were released in January 2020 suggesting that the growth of the country would slide to 5 percent during fiscal 2019-20.

According to the UN report

This year one out of five countries will see per capita income stagnating or decreasing, but listed India among a few countries where the per capita GDP growth rate could reach 4% in 2020. It also said that eradicating poverty will increasingly rely on tackling inequality going forward.

Prolonged weakness in global economic activity can cause significant setbacks to sustainable development, including targets for eradicating poverty and creating decent jobs for all. At the same time, systemic inequality and the worsening climate crisis in many parts of the world are fuelling growing discontent.

As the global economic balance shifts from the EU, the US and other developed countries to China, India and other developing countries, global economic decision-making control also shifts, it noted.“This changing dynamic will need to be understood by global partnership mechanisms thus allowing the under-represented to be noticed,” it said.

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