India’s Gross Domestic Product growth rate for the full year 2020-’21 is expected to contract by 7.7% in real terms, as compared to a growth of 4.2% in the previous financial year, government data for the first advance estimates of this fiscal showed on Thursday. In nominal terms, the GDP growth rate is expected to contract by 4.2%, the data showed.
Real GDP refers to the growth rate in absolute terms, while nominal GDP is the inflation-adjusted figure.
As per the first advanced estimates of the national income released by the National Statistical Office on Thursday, there was contraction in all sectors with the exception of agriculture and electricity in this fiscal. Trade and hotels sector witnessed the sharpest contraction at 21.4%, followed by construction and manufacturing at 12.6% and 9.4%, respectively. Even agriculture, which is estimated to grow at 3.4%, will register a slower rate, as compared to 4% in 2019-’20.
If the final numbers for the GDP are as predicted on Thursday, this will be the sharpest contraction since Independence, according to Bloomberg. The economy had last witnessed a contraction in 1979-’80, when the growth rate shrunk by 5.24%.
The government said that the contraction was because of the nationwide lockdown imposed in March 2020 amid the coronavirus pandemic.
“Though the restrictions have been gradually lifted, there has been an impact on the economic activities as well as on the data collection mechanisms,” the government said in its release on Thursday.
The GDP growth rate contracted by 7.5% in the second quarter (July-September), after shrinking by an unprecedented 23.9% in the first three month period (April-June) of this financial year. Last month, the Reserve Bank of India had predicted the growth rate may enter the positive territory in the third quarter (October-December). Earlier, the central bank had also revised real GDP growth rate projection for the year 2020-’21 from -9.5% to -7.5%, after its bi-monthly monetary police meeting in December.
The first advance estimates for a financial year is usually released before the Union Budget for the next year. This data, as well as projections for the coming year, are shared by NSO with the Finance Ministry and other departments, to aid in the budget-making process.