Tribune News Service
New Delhi, January 7
The Indian economy is poised for its biggest-ever contraction since 1952 after the first advance estimate on Thursday projected a 7.7 per cent shrinkage in gross domestic product for the financial year ending March 2021.
According to analysts, the NSO’s advanced estimates are reasonably accurate as they have been correct about the real GDP growth rate in three of the past 12 years.
The estimated fall is steeper than a 7.5 per cent drop predicted by the Reserve Bank of India and other rating agencies. However, the World Bank has forecast shrinkage of 9.6 per cent this year.
The numbers are driven by negative growth rates in seven of the eight sectors for which data is reported. Agriculture will be the sole bright spot and is projected to grow at 3.4 per cent but manufacturing will contract 9.4 per cent.
The worst hit will be trade, hotel, and transport in the services sector which are projected to contract by 21.4 per cent. Manufacturing has continued with its pre-Covid poor performance when it registered a growth of just 0.03 per cent last year.
The first quarter (April-June) saw a contraction of nearly 24 per cent, mainly due to one of the most stringent lockdowns imposed in the world. The contraction slowed down to 7.5 per cent in the second quarter (July-September quarter) but the GDP contraction for the first half of the year was 15.7 per cent.
The First Advance Estimate will serve as the benchmark for the Union Finance Ministry in preparing the Union Budget 202, to be presented early next month.
“In terms of the sectoral data, our own estimates pencil in a weaker performance of construction, financial, real estate and professional services (FRP), and public administration, defence, and other services (PADOS), and a stronger performance of manufacturing, mining and quarrying, trade, hotels, transport, communication and services related to broadcasting (THTCS), compared to the Advance Estimates for FY2021,” said rating agency ICRA.