Virendra Pandit
New Delhi: India’s economy could contract 7.7 percent in 2020-21 but can look forward to real GDP growth of 11 percent in the year ahead, FY22, the Economic Survey said here on Friday.
The country’s growth was pulled down mainly by the coronavirus pandemic and the months-long nationwide lockdown to contain the pandemic, Chief Economic Advisor Krishnamurthy Subramanian said in the Economic Survey 2020-21, tabled in Parliament on the opening day of the Budget Session.
Real GDP growth could be 11 percent in the next financial year, the Survey said.
“Agriculture has remained the silver lining, while contact-based services, manufacturing, and construction sectors were the worst hit by the COVID-19 pandemic,” said the Survey. It predicted a V-shaped economic recovery spurred by India’s COVID-19 vaccination program, launched on January 16 as the world’s largest such drive against the pandemic.
The Economic Survey, tabled in Parliament by Finance Minister Nirmala Sitharaman two days before the Union Budget, analyses the trends in agricultural and industrial production, employment, money supply, and other sectors.
The Union Budget, to be presented on February 1, is expected to increase spending on healthcare, raise levies on a range of imported goods, and may introduce a pandemic cess.
The Economic Survey’s estimates are broadly in line with the forecasts by the Reserve Bank of India, most international agencies, and individual experts. The central bank had, in December 2020, said it expected the country’s GDP to contract 7.5 percent in 2020-21, in an upward revision from its earlier forecast of a 9.5 percent contraction.
On Tuesday, the International Monetary Fund (IMF) had pegged the contraction 8 percent in FY21, higher than the 7.7 percent decline projected by the government’s advance estimates. The IMF expected a growth rate of 11.5 percent in FY22, followed by a decline to 6.8 percent in 2022-23. It also suggested that India would regain the tag of the fastest-growing large economy in the world in both years.
On January 14, Fitch Ratings had said India’s economy would suffer lasting damage from the pandemic and, after an initially strong rebound in 2021-22, the annual growth rate would slow to around 6.5 percent over FY23-FY26.
The RBI, in its January bulletin, had said the economy was at the cusp of growth due to the COVID-19 vaccination program. “What will 2021 look like? The shape of the recovery will be V-shaped after all and the ‘V’ stands for a vaccine,” said an article on the ‘state of the economy’ in the bulletin.
