Coronavirus eats into Indian economy, GDP shrinks 7.3%

New Delhi: As expected, India’s economy or gross domestic product (GDP) has contracted by 7.3 per cent for the fiscal year 2021 because of Coronavirus-induced lockdowns and prolonged restrictions on the operation of several sectors like hospitality, entertainment, tourism, etc.

The 7.3 per cent contraction is the worst-ever economic performance that India has witnessed in over four decades and it has wiped out the economic growth achieved in the previous one-and-a-half years. The Indian economy has now shrunk back to the size it was in the middle of 2018-19.

However, India has witnessed two consecutive quarters of GDP expansion after two consecutive quarters of contraction earlier in the financial year.

According to the government data released by National Statistics Office (NSO) on Monday, "Real GDP or Gross Domestic Product (GDP) at Constant (2011-12) Prices in the year 2020-21 is now estimated to attain a level of Rs 135.13 lakh crore, as against the First Revised Estimate of GDP for the year 2019-20 of Rs 145.69 lakh crore, released on January 29, 2021. The growth in GDP during 2020-21 is estimated at -7.3 per cent as compared to four per cent in 2019-20."  

The third-quarter GDP growth had turned positive, registering 0.5 per cent growth (revised upwards from 0.4 per cent earlier) after a sharp contraction of nearly 24 per cent and 7.5 per cent in the first and second quarter, respectively. In the fourth quarter, the economy grew 1.6 per cent.

While the annual economic contraction was expected, experts are concerned about a mere 1.6 per cent growth during the fourth quarter as they believe it indicated that "all is not well" with the economy and its fiscal health. But the government is hopeful that there will be a speedy revival of the economy soon.

Reacting to the Q4 GDP numbers, Chief Economic Advisor (CEA) Krishnamurthy Subramanian said there had been a marginal improvement in the FY'21 GDP. "The demand in rural India has been resilient. Earlier last year, rural India continued to aid the economy while urban India fought the initial wave of covid-19. The agriculture sector has been a silver lining, clocking consecutive growth," Subramanian said.

"After the quarter one numbers were released, we had said things will get better from here and had predicted growth. It is heartening to know those projections have held. Annual numbers signify a revival in demand. The second wave is likely to have hit some of the recoveries, and it will have some impact on the economy," the CEA added.