NSO: GDP to Contract by 7.7% in FY21

The National Statistical Office (NSO) has recently released the first advance estimate of GDP for the country. As per the estimates by NSO, India’s gross domestic product would be pulled down by 7.7% in the year 2020-21.

Key Points

  • As per Bloomberg, this will be the largest annual contraction in GDP records since the year 1952.
  • The estimation by the National Statistical Office is close to the 7.5 percent contraction estimate made by the Reserve Bank of India.
  • As per Economy trackers and experts, the annual real GDP growth will contract by 6.5% to 9.9%.
  • As per the release, the nominal GDP will decrease by 4.2 percent.
  • As tax revenue grows in accordance with the nominal GDP, revenue stress is expected to be of the same magnitude.
  • Advance estimates of GDP are important as the Union Budget uses these numbers for assuming GDP growth at present prices for the next fiscal year and on the basis of this, fiscal deficit and tax numbers are calculated.
  • Investments are expected to decrease by 14.5% and on the other hand, private consumer spending would decrease by 9.5%.
  • However, government spending is expected to grow, but at 5.8% in 2020-21.
  • As expenditure by the Centre and the states did not grow in the first half of the fiscal year 2020-21, it is expected that governments will increase spending in the second half.
  • Manufacturing will decline by 9.4% and services by 8.3%. However, the financial services and real estate sectors of the services sector would decline by only 0.8 percent. This shows a stronger recovery.
  • Sectors like transport, trade, communication services, and hospitality are expected to see a huge decline of 21.4% in 2020-21.
  • Gross value added in agriculture would grow by 3.4 percent.
  • As per the estimates, some sectors will show good improvement in the second half of the fiscal year.

Experts have seen improvement in the second half of the fiscal year 2020-21, but also pointed out the limitations in the data.

Current Affairs