GDP (Representative image)
The devastation that the COVID-19 pandemic inflicted upon India’s economy was reflected in the GDP data released by the National Statistical Office on May 31. For the first time since 1980-81, India’s COVID-hit economy contracted by 7.3 percent in 2020-21.
The country’s GDP had reported a growth of 4 percent in 2019-20.
However, India’s economy recorded a growth of 1.6 percent in the fourth quarter indicating that the economy was in a revival mode before the second wave of the COVID struck the country.
The Reserve Bank of India and the Ministry of Statistics and Programme Implementation (MOSPI) in their advanced estimates released in February expected GDP for the full year to contract by 8 percent.
The better-than-estimated numbers have been reported to be driven by several sectors showing a positive turnaround while there have also been other sectors which continued to give a dismal performance yet again.
Moneycontrol takes a dive into the sectors which emerged out as winners and those as losers.
Agriculture – In line with expectations, agriculture once again becomes a bright spot, continuing its streak of consecutive good performance. The sector posted a full year growth of 3.6 percent and 3.1 percent for the final quarter. It had posted a growth of 3.5 percent in the first quarter, 3 percent in the second quarter and a revised growth of 4.5 percent rise in the third quarter.
Construction – Giving a pleasant surprise, the construction sector posted a significant improvement in its performance by growing 14.5 percent in the fourth quarter indicating a rebound post unlock and before the second wave. The COVID-hit sector however posted a contraction of 8.6 percent for the full year.
Manufacturing – Much like construction, manufacturing sector too picked pace thereby posting a growth of 6.9 percent in the January-to-March quarter thus contributing significantly to the last quarter. The sector however recorded a full year contraction of 7.2 percent in FY21 much severe than the 2.4 deceleration posted in FY20 on the back of the COVID-19 pandemic and the subsequent lockdown. While the sector posted improvement, the havoc wreaked by the second wave may derail its recovery in the upcoming quarters.
Services – As widely expected by analysts, trade, hotel and transport continued to be the worst hit as a result of the pandemic. The sector posted a massive slump of 18.2 percent in FY21 against a growth of 6.2 percent a year before. While the sector did manage to narrow the contraction in the final quarter by shrinking 2.3 percent as against 48.1 percent in the first lockdown-hit quarter. The sector appears to have squared back to the level it was a year ago with rise in fresh cases of COVID and the uncertainty it entails. Thus, the little recovery that the sector had made post the unlock appears to recede once again.
Consumption – Private Final Consumption Expenditure (PFCE) which gauges households spending posted a sharp contraction of 9.1 percent in FY21. PFCE now constitutes 56 percent of GDP, down from 57.1 percent in the previous fiscal. In Q4, PFCE comprises 55.4 percent of the GDP against 58.3 percent in the quarter ended December. A sharp fall in spending comes on the back of massive job and salary cuts that occurred due to COVID-19-induced lockdown thereby prompting households to put off the purchases and save instead. With the devastation that the second wave is exposing the economy to, the households expenditure may continue to remain muted.
Investment – Investments, as reflected by gross fixed capital formation (GFCF), are vital to kick off the cycle of job creation. Demand revival contracted by a massive 10.8 percent during 2020-21 hinting that the COVID-19 crisis dented the investment sentiment in the country. It however posted growth of 10.8 percent in the fourth quarter ended March.