Better handling of Covid led to swift economic recovery: Govt

The advanced estimates of economic growth released by the country’s apex statistics body – the National Statistics Organisation (NSO), which pegged the contraction of the GDP in the current fiscal at 7.7%, strengthened the government’s hope of a V-shaped economic recovery, writes Deputy News Editor Krishnanand Tripathi.

New Delhi:A better handling of the Covid-19 global pandemic situation in India in comparison with the situation in several other advanced economies led to a swift economic recovery, said the government as the new data suggested the decline in the real GDP growth in the current fiscal is likely to be less than 8%.

The advanced estimates of economic growth released by the country’s apex statistics body – the National Statistics Organisation (NSO), which pegged the contraction of the GDP in the current fiscal at 7.7%, also strengthened the government’s hope of a V-shaped economic recovery, which means the Covid-19 induced economic slowdown will be short-lived.

“The relatively more manageable pandemic situation in the country as compared to advanced nations has further added momentum to the economic recovery, said the government adding that the situation will improve further as it was about to start a mega vaccination drive following the emergency approval to the two Covid vaccines early this month.

In terms of the number of Covid-19 infections, India is the second country in the world after the USA which has nearly 22 million cases against 10.04 million cases in India.

However, despite its over 1.35 billion population, India's death rate is low in comparison with other advanced economies. The highly contagious SarS-CoV-2 virus has killed over 370,000 people in the USA, followed by Brazil (199,000) and India (150,000).

According to the latest data released by the ministry of health and family welfare on Thursday, India's total recovered cases crossed the mark of 10 million cases, 44 times more than the number of active cases in the country with one of the lowest mortality rates in the world.

Real GDP decline pegged at 7.7%

The advance estimates released by the national statistics office (NSO), pegged the real GDP growth for the FY 2020-21 at -7.7% and nominal GDP growth rate at -4.2%, which is in line with the estimates by several other agencies, including the Reserve Bank’s estimate of a contraction of 7.5% this year.

In December, the Reserve Bank estimated overall GDP decline in the year to be 7.5%, an improvement of 2% over the projections made in October by the Bank.

“Movement of various high-frequency indicators in recent months, points towards broad-based nature of resurgence of economic activity,” said the finance ministry while commenting on the first advance estimate of GDP growth released by the ministry of statistics and programme implementation.

The second advance estimate of GDP growth is likely to be released by the end of February.

New data betters GDP growth in Q1

According to the first advance estimate released by the NSO, the real GDP declined by 15.7% in the first quarter (April-June 2020) as against the earlier projection of 23.9%. The latest data also reveals that the economic recovery was swift in the second quarter, as the GDP grew by 21% during the July-September period on the quarter-on-quarter basis.

“The advance estimate of 2020-21 reflects a continued resurgence in economic activity in Q3 and Q4, which would enable the Indian economy to end the year with a contraction of 7.7 per cent,” said the government.

“The continuous quarter-on-quarter growth endorses the strength of economic fundamentals of the country to sustain a post-lockdown V-shaped recovery,” the government said in a statement.

Farm sector, Govt expenditure drive recovery

The government said the recovery will be supported by the increased public expenditure as the Government Consumption Expenditure will rise by 5.8% this year, followed by the growth in the agriculture sector which has been pegged at 3.4% for the fiscal against the 4% growth in the last fiscal.

In the manufacturing sector, electricity generation is estimated to register positive growth of 2.7% this fiscal.

Transport, hotels, trade, communications hit

As expected the services sector has been the worst affected by the outbreak of Covid-19 global pandemic.

The pandemic and associated public health measures have adversely affected the contact-sensitive services sector where trade, hotels, transport and communication have been estimated to contract by 21.4% the FY 2020-21, said the government.

Worrying signs

Despite an expected increase in government spending, private consumption is expected to decline by 9.5% this year. Similarly, fixed investment is likely to decline by 14.5%, imports by 20.5% and exports by 8.3%, which is a cause of concern for the policymakers.

On the supply side, the government estimates suggest 3.4% growth in the agriculture sector followed by electricity generation which is expected to grow by 2.7%.

Except for these two sectors, other supply-side sectors of the economy are expected to register a decline this year. Construction sector is estimated to decline by 12.6%, followed by mining (-12.4%), manufacturing (-9.4%) and services (-8.8%).