Indian economy is estimated to contract 7.7 percent in the financial year 2020-21 compared to 4.2 percent growth in the previous financial year 2020-21 compared to 4.2 percent growth in the previous financial year, mainly on account of the impact of the coronavirus pandemic.
"Real GVA at basic prices is estimated at Rs 123.39 lakh crore in 2020-21, as against Rs 133.01 lakh crore in 2019-20, showing a contraction of 7.2%", the NSO press release noted.
As per quarterly estimates of NSO, real GDP contracted by 15.7 percent in the first half of 2020-21.
"We could see the worst-ever fiscal deficit numbers in the current financial year", said another government source with direct knowledge of budget matters, adding the fiscal deficit could touch 8.0 per cent of GDP. The pandemic and associated public health measures have adversely affected the contact-sensitive services sector where trade, hotels, transport and communication are estimated to contract by 21.4 per cent in 2020-21.
Agriculture sector is estimated to see a growth of 3.4 per cent in 2020-21. The economy had grown 4.2 per cent a year ago.
It must be recalled that the economy shrank by a staggering 23.9 per cent in the first quarter of 2020-21 as the entire country went under a strict lockdown to contain the spread of coronavirus. The contraction was reduced to 7.5% in the September quarter. The fiscal deficit had breached the Budget target in July itself as the economy faced the most stringent Covid lockdown in Q1.
Real GDP refers to the growth rate in absolute terms, while nominal GDP is the inflation-adjusted figure.
"This estimate, however, has a shelf life of only two months and is only used as an input for budget arithmetic", said Soumya Kanti Ghosh, group chief economic adviser, at the State Bank of India. The growth is expected to recover to 5.4 per cent in 2021, it said.
Puri said even real estate, which makes a significant contribution to the GDP, is seeing visible signs of recovery with residential sales rising significantly in the festive quarter.
This number is important and will feed into the calculations for the revised estimates for 2020-21, when finance minister Nirmala Sitharaman presents the budget on February 1. In this context, the revenue deficit is likely to be 100% higher than the budget estimate.
Another good thing is the improvement in the manufacturing sector. In the manufacturing sector, electricity sector is estimated to register a positive growth of 2.7%.
The World Bank said the economic impact of the pandemic has been somewhat less severe across South Asia but still significant.
The rating agency, therefore, expects GDP growth to turn positive in the fourth quarter of FY21 and FY22 GDP expansion to come in at 9.6 percent.
GVA or "gross value added", which strips out indirect taxes and subsidies, is expected to show a contraction of 7.2%.