Sep22
2020Strict nationwide lockdown due to the novel coronavirus (COVID-19) during the first quarter of the financial year 2020-21 has resulted in very limited economic activity in the country during that quarter. As a result, India’s Gross Domestic Product (GDP) for the April-June quarter (Q1) slipped by a sharp 23.9 per cent, as per provisional estimates released by Ministry of Statistics and Programme Implementation (MoSPI) on 31st August, 2020. The GDP had expanded by 5.2 per cent in the corresponding quarter of 2019-20.
This is the first instance of an economic contraction for the country in at least four decades, and also the first GDP decline since India began publishing quarterly numbers in 1996. In the January-March quarter of this year, the economy had grown by 3.1 per cent year-on-year — the lowest rate in over 17 years — and by 5.2 per cent in the June quarter of 2019-20. The rate of India's GDP growth had declined from 6.1 per cent in FY19 to 4.2 per cent in FY20, the slowest in 11 years. The contraction in the April-June Quarter was mainly due to the central government on March 25 had ordered a complete lockdown of most of the manufacturing and service sectors owing to the spread of COVID-19. Only essential services such as food items and medicines were allowed during this period as the country tried to curb the spread of the virus across the country.
As per the government data, the Gross Value Added (GVA) at basic price at constant terms during the June quarter shrunk 22.8 per cent. The GVA at Basic Price at Current Prices slipped 20.6 per cent in Q1 2020-21. The official figures were broadly in line with estimates by various agencies, all of which had forecast a decline in GDP during the quarter, though they had different in the extent of drop — from 15 per cent to 35 per cent. Here is a statistical analysis of various factors that have caused the economy to shrink.
Global Economic Outlook:
India is not alone in reporting dismal GDP numbers. The UK’s economy shrank 21.7 per cent, Germany’s by 19.0 per cent, and the US’ by 9.5 per cent. Here is the list of some major economies of the world and the state of their GDP growth.
GDP Growth for the quarter ended June 2020 (in %) | |||
Country | Change over Previous Quarter |
Change over the same Quarter of Previous Year |
IMF Projections for 2020 |
India | -29.3 | -23.9 | -4.5 |
United Kingdom | -20.4 | -21.7 | -10.2 |
France | -13.8 | -19.0 | -12.5 |
Italy | -12.4 | -17.3 | -12.8 |
Canada | -12.0 | -13.5 | -9.4 |
Germany | -9.7 | -11.7 | -7.8 |
Japan | -7.8 | -10.0 | -5.8 |
United States | -9.5 | -9.5 | -8.0 |
South Korea | -3.3 | -2.9 | -6.6 |
China | 11.5 | 3.2 | 1.0 |
Sectoral Analysis:
Industry | April-June (Q1) | ||||
2018-19 | 2019-20 | 2020-21 | Percentage Change Over Previous Year | ||
2019-20 | 2020-21 | ||||
Agricultural, Forestry & Fishing | 4,27,177 | 4,39,843 | 4,54,658 | 3.0% | 3.4% |
Mining & Quarrying | 88,634 | 92,807 | 71,209 | 4.7% | -23.3% |
Manufacturing | 5,61,875 | 5,78,936 | 3,51,396 | 3.0% | -39.3% |
Electricity, Gas, Water Supply, & Other Utility Services | 74,998 | 81,628 | 75,877 | 8.8% | -7.0% |
Construction | 2,49,913 | 2,62,828 | 1,30,750 | 5.2% | -50.3% |
Trade, Hotels, Transport, Communication and Services related to Broadcasting. | 6,09,330 | 6,30,860 | 3,34,284 | 3.5% | -47% |
Financial, Real Estate & Professional Services | 7,57,850 | 8,03,322 | 7,60,491 | 6.0% | -5.3% |
Public Administration, Defense & Other Services | 3,87,589 | 4,17,483 | 3,74,656 | 7.7% | -10.3% |
GVA at Basic Price | 31,57,366 | 33,07,707 | 25,53,320 | 4.8% | -22.8% |
Source: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI) press release.
Major Fall in Economic Activities across all Sectors:
Indicator | Q1 2019-20 | Q1 2020-21 |
Production of Coal | 2.6% | -15.0% |
Production of Cement | 1.0% | -38.0% |
Consumption of Steel | 5.0% | -56.8% |
Total Telephone Subscribers | 1.5% | -2.0% |
Commercial Vehicle Sales | -9.5% | -84.8% |
Cargo Handled at Major Sea Ports | 1.7% | -19.8% |
Cargo Handled at Airports | -6.5% | -57.2% |
Passengers handled at Airports | -0.6% | -94.1% |
Railways, net tonne Kilometers | 0.7% | -26.7% |
Source: Ministry of Statistics and Programme Implementation
Engines of GDP Growth:
In any economy, the total demand for goods and services – that is the GDP – is generated from four engines of growth. These four engines are the main constituents of the GDP. They are as follows:
GDP = C + I + G + NX |
Where,
Contributors from various engines to GDP in the FY 2019-20:
Contributing Factor to GDP |
% contribution | |
[C] | Consumer Demand | 56.4% |
[I] | Investment by private sector | 32.0% |
[G] | Government Expenditure | 11% |
[NX] | Net Export | 0.6% |
Notes:
Quarter to Quarter Comparison:
Engines of Growth | Q1 of FY 2019-20 | Q1 of FY 2020-21 | Difference | % Change | |
(Rs. in Crores) | (Rs. in Crores) | (Rs. in Crores) | (Year in Year) | ||
[C] | Expenditure by Individual Consumer | 19,92,967 | 14,61,164 | -5,31,803 | -27% |
[I] | Expenditure/Investment by Private Businesses | 11,32,195 | 5,99,192 | -5,33,003 | -47% |
[G] | Government Expenditure | 4,18,249 | 4,86,636 | 68,387 | 16% |
[NX] | Net Demand from Exports minus Imports | -1,17,242 | 75,675 | 1,92,917 | 165% |
Total (including discrepancies) | 35,35,267 | 26,98,556 | -8,45,771 | -23.9 |
Source: MoSPI and Express Research Group
Notes:
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