India’s Gross Domestic Product (GDP) contracted 7.3 percent in Covid-19 as per the figures released by MOSPI battered financial year 2021 (FY21) as compared to the 4 percent growth in the previous Financial Year 2019-20 (FY20).
The country’s real GDP or GDP calculated at the 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.
India’s GDP Growth
Growth in the fourth quarter was driven mainly by business investment and a surge in government spending. Consumption spending also gained traction this quarter, suggesting a possible improvement. Exports also did exceptionally well. “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 in the first quarter of FY22 because of the low-base effect of last year due to national lockdown. Economists also expects 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 in the second half of FY22. Factors such as- falling infections, a potential increase in pace of vaccination, and the oncoming festivals in the following months will likely to boost consumer and investment spending owning to strong pent-up demand.
A nationwide lockdown during the first wave of pandemic last year sae the economy entering into a technical recession owning to two consecutive quarters if degrowth in Q2 and Q3. However, unlocking of the economy in subsequent months led to recovery in subsequent quarters.
The per capita income in real terms during 2021 was estimated Rs 85,929 as compared to Rs 94,466 in the year 2019-20, slipping 9.1 percent on yearly basis. Per capita income is the average income earned per person in a given year during a specific year.