India’s economy could contract 7.7 per cent in the financial year that ends on March 31, pulled down mainly by the coronavirus pandemic and the weeks-long nationwide lockdown to contain the disease, Chief Economic Advisor Krishnamurthy Subramanian has estimated in the Economic Survey 2020-21, tabled in Parliament on Friday. Real GDP growth could be 11 per cent 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 programme.
The survey sees headline inflation moderating going forward: a development that could open up room for the Reserve Bank of India to resume monetary policy easing to complement fiscal measures to support the economy, said a Bloomberg report.
The Economic Survey, presented in Parliament by the finance minister 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 by Finance Minister Nirmala Sitharaman on Monday, is expected to increase spending on healthcare, raise levies on a range of imported goods, and likely introduce a Covid-19 cess. "Send me your inputs so that we can see a Budget which is a Budget like never before, in a way. Hundred years of India wouldn't have seen a Budget being made post pandemic like this," Finance Minister Nirmala Sitharaman told a business summit in December.
The Economic Survey 2020-21’s estimate is broadly in line with the forecasts by the central bank, most international agencies and private experts. The Reserve Bank of India (RBI) had in December said it expected the country’s GDP to contract 7.5 per cent in the year ending March 31, 2021, in an upward revision from its earlier forecast of a 9.5 per cent contraction.
The International Monetary Fund (IMF) on Tuesday pegged the contraction in India's economy at 8 per cent in the current financial year, higher than the 7.7 per cent decline projected by the government’s advance estimates. The IMF expects a growth rate of 11.5 per cent in the next financial year before a decline to 6.8 per cent in 2022-23, and that India would regain the tag of the fastest-growing large economy in the world in both years.
India’s economy would suffer a lasting damage from the coronavirus crisis and after an initial strong rebound in financial year 2022 the annual growth rate would slow to around 6.5 per cent over FY23-FY26, Fitch Ratings said on January 14.
The RBI, in its January bulletin, had said the economy was at the cusp of growth due to the Covid-19 vaccination programme. "What will 2021 look like? The shape of the recovery will be V-shaped after all and the 'V' stands for vaccine," said an article on the 'state of economy' in the bulletin.