COVID-19 Impact: India's GDP Contracts 7.3% In FY21, Grows 1.6% In Q4

The Q4 numbers reflect the recovery phase of post the first wave of the pandemic, bringing an overall contraction of 7.3%

Despite a growth spurt in the tail end of the last financial year, the Indian economy has contracted an overall 7.3% in the full financial year, better than the governmental estimates of an 8% contraction for the year ending March 31, 2021. The economy grew 1.6% in the fourth quarter of the previous financial year 2020 - 2021 (January 2021 to March 2021) compared to the same period last year, according to the latest numbers released by the National Statistics Office (NSO).

The fourth quarter of the previous financial year captures the the economic activity when COVID-19 specific restrictions in India were loosened and the vaccination drive against coronavirus began; before the second devastating wave of the pandemic hit the economy, paving the way for new restrictions in April and May.

In the third quarter of FY21, the economy grew a marginal 0.4% (revised upwards to 0.5% in this release), leading the economy out of a period of technical recession caused due to two successive economic contractions in the quarters before that.

Also Read: GDP Growth At 0.4% In Q3, Economy To Still Contract By 8% In FY21

Here's how the Indian economy has grown over the course of the last financial year.


To put these numbers in perspective, the research desk of the State Bank of India pegged this quarter's growth rate to 1.3%. ICRA forecasted a growth of 2% in the last quarter.

Further, the income side of various sectors of the economy, measured by the gross value added, grew 3.7% quarterly (measure over the same period in the previous year), and contracted 6.2% yearly.

However, the numbers came with a rider. The NSO has said that the pandemic has disrupted their regular flow of data, which has had a bearing on quarterly estimates; a shortcoming overcome by the NSO by relying on alternative data sources, indicators and methodologies. "Estimates are, therefore, likely to undergo sharp revisions in due course, as per the release calendar", states the NSO, asking users to take them into account while interpreting them.

FY22 growth projections reduced

Before the second wave of the pandemic starting taking a toll on lives and livelihood, several agencies were upbeat on the economic growth India would see in the ongoing financial year (FY22), which have since then been downgraded.

These downgrades have been done by brokerages and banks, though official governmental institutions and international bodies are yet to revise their forecasts for the lockdowns witnessed by the second wave. HDFC Bank has downgraded India's FY22 forecast to be 10% in a base scenario and 8% in a worst-case scenario. Goldman Sachs has downgraded its estimates only marginally to 11.1% from 11.7%. Nomura, JP Morgan, Citi and UBS too have slightly downgraded their forecasts to account for the second wave.

The Reserve Bank of India maintains that India will grow 10.5% this year, while the government states that this growth rate will be 11%, in the Economic Survey before the Union Budget. The International Monetary Fund puts this estimate at 12.5%. Read this here.

Read the data released by the government here.

Also Read: IMF Upgrades India's Growth Projections To 12.5% In FY22 In Latest WEO

Updated On: 2021-05-31T18:23:05+05:30
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