GDP contracts by 7.3 percent in 2020-21, an all-time low in the last four decades!

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India’s Gross Domestic Product (GDP) contracted by 7.3 percent in 2020-2021 in stark comparison to the GDP growth of 4 percent in 2019-20, as per a provisional national annual income estimate released by the National Statistical Office on May 31, 2021.

“GDP at Constant (2011-12) Prices in 2020-21 is now estimated to attain a level of Rs. 135.13 lakh crore, as against the First Revised Estimate of GDP for 2019-20 of Rs. 145.69 lakh crore, released on 29th January 2021,” said the report.

Moreover, GDP at Current Prices for this fiscal is estimated to contract by 3 percent as compared to 7.8 percent growth in 2019-20, with Rs. 197.46 lakh crore estimated for this fiscal rather than the First Revised Estimates of Rs. 203.51 lakh crore last year.

All in all, despite the meagre rise in the fourth quarter of 1.6 percent, experts have termed this as one of the worst performances of the Indian economy in the past four decades. Only two industries – Agriculture, Foresting and Fishing and Electricity, Gas, Water Supply and other utility services – out of all sectors managed a marginal increase in gross value added (GVA).

According to Business Insider, India has only registered negative growth five times in history, that too owing to droughts, floods or energy prices that threw the agrarian economy off its axis. The last such contraction took place in the 1980s when India was simultaneously dealing with a drought and skyrocketing crude oil prices in the face of the Iranian revolution.

In recent times too, the Government of India has blamed the spread of the Covid-19 infection for the severe impact on economic activities and data collection mechanisms.

“There have been disruptions in data flow from some source agencies leading to data coverage issues. The limitations in the datasets and the timeliness have a bearing on the GDP estimates and its subsequent revisions. To address the data challenges arising out of the unprecedented situation, the National Statistical Office has explored alternate data sources, indicators and methodology along with clarifications from international agencies, to capture the current economic situation, as per accepted best practices. Estimates are, therefore, likely to undergo sharp revisions in due course, as per the release calendar. Users should take this into consideration when interpreting the figures,” said the Centre in the report.