5 Takeaways From Govt's First GDP Estimates Data For 2020-21

1. GDP to contract by 7.7% in 2020-21

FAE data released on Thursday shows that India is likely to attain the level of Rs 134.40 lakh crore, as against the Provisional Estimate of GDP for the year 2019-20 of Rs 145.66 lakh crore, released on 31 May 2020. The growth in real GDP during 2020-21 is estimated at -7.7% as compared to the growth rate of 4.2% in 2019-20.

Real GVA (Gross Value Added) 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%.

2. Quarterly GDP estimates

Quarterly estimates of NSO show that real GDP contracted by 15.7% in the first half of 2020-21. Real GDP on a quarter-on-quarter basis grew at 21% from April-June 2020 to July-September 2020.

"The AE of 2020-21 reflect continued resurgence in economic activity in Q3 and Q4 - which would enable the Indian economy to end the year with a contraction of 7.7%. The continuous quarter-on-quarter growth endorses the strength of economic fundamentals of the country to sustain a post-lockdown V-shaped recovery," said the finance ministry in a statement post the release of FAE.

3. Demand and supply estimates

On the demand side, real GDP in 2020-21 has been supported by an estimated increase in Government Consumption Expenditure by 5.8%.

On the other hand, rest of the components, namely, Private Consumption, Fixed Investment, Exports and Imports, are expected to have declined by 9.5%, 14.5%, 8.3% and 20.5%, respectively.

On the supply side, agriculture is estimated to register positive growth of 3.4% against 4% as per the PE of 2019-20. In the manufacturing sector, electricity sector is estimated to register a positive growth of 2.7%.

"The pandemic and associated public health measures have adversely affected the contact-sensitive services sector where trade, hotels, transport & communication are estimated to contract by 21.4% in FY 2020-21," the finance ministry said.

4. Hope of resurgence of economic activity

Finance Ministry's statement on the FAE said, "The movement of various high-frequency indicators in recent months, points towards broad-based nature of resurgence of economic activity. The relatively more manageable pandemic situation in the country as compared to advanced nations has further added momentum to the economic recovery."

"As two vaccines get emergency use approval in India, the government is undertaking preparations of a mass mega vaccination drive. However, while the impending vaccination is drawing closer, continued observation of "covid-appropriate" behaviour, caution and surveillance is crucial," the ministry added.

5. Compilation of advanced estimates

The approach for compiling the Advance Estimates is based on Benchmark-Indicator method.

The sector-wise Estimates are obtained by extrapolation of indicators like

1. Index of Industrial Production (IIP) of the first 7 months of the financial year
2. financial performance of Listed Companies in the Private Corporate sector available up to quarter-ending September 2020
3. First Advance Estimates of Crop production
4. Accounts of Central & State Governments
5. information on indicators like Deposits & Credits, Passenger and Freight earnings of Railways, Passengers and Cargo handled by Civil Aviation, Cargo handled at Major Sea Ports, Sales of Commercial Vehicles, etc., available for first 8 months of the financial year.