India’s GDP contracts -7.3% in FY21, worst in over four decades

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The prevailing Coronavirus pandemic has affected India's gross domestic product (GDP).

India’s gross domestic product (GDP) for the January-March quarter and also for the financial year 2020-21 contracted a four-decade low, with the growth recording by -7.3 per cent during FY21. The fourth-quarter numbers recorded a growth of 1.6 per cent.

In 2019-20, the GDP had shown a poor growth of four per cent, an 11-year low. It was 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.

The Central Statistics Office (CSO) released the GDP numbers for the January-March quarter and financial year 2020-21 on Monday evening.

Hit by the pandemic and the nationwide lockdown imposed to curb the spread of infections last year, India’s economy had contracted during the first half of FY21, before returning to positive territory in the October-December quarter with a growth of 0.4 per cent. In April-June, the economy had shrunk by 24.38 per cent, which improved to a 7.5 per cent contraction in July-September.

The CSO had projected an 8 per cent GDP contraction in FY21. It had implied a contraction of 1.1 per cent in the March quarter. Meanwhile, the Reserve Bank of India had projected a 7.5 per cent contraction for FY21. However, most of the analysts had expected the economy to bounce back at a better-than-expected pace in the March quarter. However, they predicted that the FY21 contraction would be less than CSO’s projection of 8 per cent.

According to an SBI research report, India’s GDP was likely to expand by 1.3 per cent in the January-March quarter. It led to a less-than-expected 7.3 per cent contraction during FY21.

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