In a huge relief to India’s growth, the economy turned a corner during the October-December quarter. It has been reported by the National Statistical Office (NSO) that India’s gross domestic product (GDP) grew at 0.4% on a yearly basis.
India’s GDP for the third quarter (Q3) that ended in December 2020 stood at 0.4%, government data released on Friday showed.
The data released by the ministry of statistics stated that “GDP at constant (2011-12) prices in Q3 of 2020-21 is estimated at Rs 36.22 lakh crore, as against Rs 36.08 lakh crore in Q3 of 2019-20, showing a growth of 0.4 per cent,”
India is now out of the technical recession which it witnessed in two consecutive quarters of negative growth of 7.3% in the July-September period and a 24.4% decline in the first quarter. India was amongst the top nations to record a high fall in GDP in its first quarter for the financial year 2020-21.
Recently in the Economic Survey, GDP for the entire FY21 was revised downwards to -8% as compared to 7.7% estimated earlier. The Economic Survey 2020-21 had also predicted the economy to grow by a significant 11% in FY22.
This projection was slightly higher than the Reserve Bank of India’s (RBI) projection of 10.5%. This also came after affirmative projection that came from the International Monetary Fund (IMF), which projected India’s GDP to grow by a significant 11.5 per cent in the same period.
NSO still records or rather predicts an 8% contraction for the FY-21. It also recorded a growth in the industry by 2.6% but recorded contraction in the service sector.
According to the NSO’s advanced estimates, there has been an improvement in the performance of manufacturing, electricity and construction. However, services, with largest share in GDP still recorded contraction with a 0.9 per cent fall year-on-year.
India, one of the largest growing economy had shrank for the first time in more than 40 years in June quarter. Stringent lockdowns, dead production and an all-time low demand in the economy had led to a battered economy which is still in the process of recovery. The pace of contraction reduced in the subsequent quarter as lockdown was lifted in a phased manner.
Additionally, in another round of data released by the Commerce and Industry Ministry , India’s eight core industries grew marginally at 0.1% in January 2021 as compared to 0.2% in December 2020. Meanwhile, the January fiscal deficit was reported at Rs 75,500 crore.
Former Chief Statistician Pronab Sen is of the opinion that the investment trends during the current fiscal year had an impact on GDP estimates for the second and third quarters and will probably affect the fourth, too. As it has been reported, India had recorded an all-time high FDI inflows in the FY 2020-21. Sen added “However, the key issue is new investment. This will determine the growth prospects for coming fiscal years,”.
The Economic Survey mentioned that a ‘V-shaped’ recovery has been underway since July, a concept Finance Minister Nirmala Sitharaman has been retrieting and rooting for months now. A V- shaped recovery is strongly expected as the pace of contraction decelerated in Q2 (-7.4%) after a sharp downturn in Q1 (-24.4%).
There are various indicators indicating towards a V shaped recovery. Data shows that the domestic consumption continued to contract at 58.6 % of GDP in Q3, as against 60.2% during corresponding period of last fiscal. Similarly, it also reports that the government spending, as reflected by the GFCE, dipped to 9.8 % of GDP from 10 per cent. However, investments, as indicated by Gross Fixed Capital Formation, touched 33 percent of GDP from 32.3 percent in Q3 FY 20.