Provisional Estimates of Annual National Income 2020-21

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Recently, the National Statistical Office (NSO), Ministry of Statistics and Programme Implementation, has released the Provisional Estimates of National Income for the financial year 2020-21, both at Constant (2011-12) and Current Prices.

• The NSO attributed  improvement in growth estimates to the improved performance of indicators, used in compilation of GVA, in the Q4 of 2020-21, owing to the calibrated and steady opening of the economy.
• The NSO also warned that data collection had been impacted by the pandemic, so its estimates could undergo sharp revisions.
  • NSO is the statistics wing of the Ministry of Statistics and Programme Implementation consists of the Central Statistical Office (CSO), the Computer center and the National Sample Survey Office (NSSO).

Key Highlights

• Gross Domestic Product (GDP)
  • It contracted by 7.3 percent in 2020-21, marginally better than the 8 percent contraction in the economy projected earlier. 
  • GDP growth in 2019-20, prior to the Covid-19 pandemic, was 4 percent.
• Gross Value Added (GVA)
  • It shrank 6.2 per cent in 2020-21, compared to a 4.1 percent rise in the previous year.
  • GVA from trade, hotels, transport, communication and broadcasting-related services recorded the sharpest decline of 18.2 percent, followed by construction (-8.6 percent), mining and quarrying (-8.5 percent) and manufacturing (-7.2 percent).
• Positive Growth in Sectors: Only two sectors bucked the trend of negative GVA growth, namely
  • Agriculture, forestry and fishing, which rose 3.6 percent.
  • Electricity, gas, water supply and other utility services rose up 1.9 percent.

(Image Courtesy: IE)

• Quarter Wise Data
  • GDP contracted 24.4 percent in April to June 2020 (Q1).
  • It was followed by a 7.4 percent shrinkage in July to September 2020 (Q2).
  • It returned to positive territory with a marginal 0.5 percent growth in October to December 2020 (Q3).
  • January to March 2021 (Q4) helped moderate the damage, with a higher-than-expected growth of 1.6 percent in GDP.
    • The extent of recovery in the performance of the informal sectors in Q4 FY2021 remains uncertain because trends in the same may not get fully reflected in the GDP data, given the lack of adequate proxies to evaluate the less formal sectors.
• Impact of Covid-19 Waves
  • Chief Economic Advisor (CEA) to the Finance Ministry highlighted that GDP forecasts are not expected to be significantly affected.
  • There is uncertainty on whether growth will be in double digits or single digits due to the possibility of a third wave too.
  • Restrictions across States have had an impact on activity but these will reduce and eventually be removed, which will help the return of economic activity.

(Image Courtesy: TH)

Projections for 2021-22

• Growth will remain subdued in the Q1 of 2021-22 as the severity of the second wave will show its impact.
• The current provisional estimates need to be counterbalanced by likely downgrades of current GDP growth estimates for 2021-22.
• The combination of the second wave and the revised base effect may imply a lower GDP growth for the Indian economy for 2021-22, may be in the range of 9-9.5 percent.
• With a lower contraction in GDP as well as GVA in 2020-21, the sharp recovery projected for 2021-22 by a number of agencies like the International Monetary Fund (IMF) at 12.5 percent and the Reserve Bank of India (RBI) at 10.5 percent may have to be moderated.
• The extent of recovery will be determined by the removal of localised lockdowns.
• Other key monitor cables are whether an accelerated pace of vaccine rollout can prevent a third Covid surge.

Source: TH