Economic growth fell to 3.1 per cent — a low not seen in more than 17 years — in the fourth quarter of 2019-20, with private investment and manufacturing hit hard even as there was the Covid-19 lockdown for only few days in March.
This pulled down gross domestic product (GDP) growth to an 11-year low of 4.2 per cent in 2019-20. This was lower than the government projection of 5 per cent in both first and second advance estimates.
Growth had stood at 6.1 per cent in the previous year. Growth in the January-March quarter slumped against the National Statistical Organisation’s (NSO’s) advance estimate of 4.7 per cent. It came down because of a contraction in the manufacturing and construction sectors.
China, with which India is in competition to be the fastest-growing large economy, saw its economy shrinking by 6.8 per cent in January-March 2020.
However, if the entire 2019 is taken into account, the Chinese economy grew 6.1 per cent. Former chief statistician Pronab Sen has projected a 10.8 per cent contraction in GDP in the current financial year if no more stimulus is given.
He expects a decline in GDP in the first three quarters with a slight recovery in Q4.
Aditi Nayar, principal economist, ICRA Ratings, said the further extension of the lockdown, though with graded relaxations, and the expectation of substantial delays in getting the full supply chain operational would further dampen economic activity.
“We expect Indian GDP (at constant 2011-12 prices) to contract by 25.0 per cent and 2.1 per cent, respectively, in Q1 FY21 and Q2 FY21, which implies that a recession is underway. Subsequently, we anticipate muted GDP growth of 2.1 per cent and 5.0 per cent, respectively, in Q3 FY21 and Q4 FY21, which still entails a full year contraction of 5.0 per cent in FY21,” said Nayar.