Indian Economy Contracted Less Than Projected In FY21

The Indian economy contracted less than projected in the fiscal ended March 2021.

GDP shrunk 6.6% in 2020-21 compared with the provisional estimate of a 7.3% contraction, according to the first revised estimates released by the Ministry of Statistics and Programme Implementation.

Gross value added in real terms contracted 4.8% compared with a contraction of 6.2% as per the provisional estimate.

Nominal GDP contracted 1.4% compared with the provisional estimate of a 3% contraction.

For 2019-20, GDP growth was revised to 3.7% from the earlier estimate of 4%. This is the second revised estimate for this year.

The first revised estimates are compiled using industry-wise detailed information instead of the benchmark indicator method used to compute provisional estimates.

When compared with the revised estimate for FY21, the first advance estimate for GDP for FY22 implies a lower growth of 8.8%, said Aditi Nayar, chief economist at ICRA. This is closer to our forecast of the GDP expansion in FY2022, following the mild disruption caused by the third wave, she said.

Savings And Investments

In 2020-21, savings rate as a percentage of GDP rose, according to the first revised estimates.

• Gross savings as a percentage of gross national disposable income for 2020-21 is estimated at 27.8%, against 29.4% for 2019-20.

• Gross capital formation-to-GDP ratio fell to 27.3% for 2020-21 against 30.7% in 2019-20.