India's economy contracts at 7.3% in FY21, worst in over four decades

The Indian economy rose by 1.6% in the January to March quarter (Q4 FY21) from the previous year but contracted by 7.3 per cent for the entire fiscal year, which was the worst in more than 40 years, data released by the government showed on Monday.

The Indian economy continued its expansion in Q4 of FY21 in line with the forecasts by experts and is the second consecutive quarter when it has grown after being in the negative territory in the two previous ones.

The Indian economy contracted by 7.3 per cent in 2020-21 against 4 per cent expansion in 2019-20, showing the impact of the raging coronavirus pandemic. The National Statistical Office (NSO) projected a GDP contraction of 7.7 per cent in 2020-21 in its first advance estimates of national accounts released in January this year. I its second revised estimates, it projected a contraction of 8 per cent for 2020-21.

A Reuters survey of 29 economists showed gross domestic product in Asia's third-largest economy grew 1.0% in the March quarter from a year earlier, up from 0.4% in the previous quarter when India began pulling out of a steep pandemic-induced recession in earlier six months. But the second wave of infections and deaths across the world's second-hardest hit country has caused forecasters to trim their projections for the coming months.

The median forecast for April-June growth is 21.6%, down from a month-earlier estimate of 23% after the resurgence prompted most industrial states to impose lockdowns, throwing millions out of work. For the fiscal year to March 2022, economists cut their median forecast to 9.8% from 10.4%, according to Reuters.

India's economy, which was hit by the coronavirus pandemic and the nationwide lockdown imposed to curb the spread of infections last year, contracted during the first half of FY21, before returning to positive territory in October-December quarter with a growth of 0.4 per cent. The economy shrunk by 23.9 per cent in April-June, which improved to 7.5 per cent contraction in July-September.

The Central Statistics Office (CSO), which releases the data, projected 8 per cent GDP contraction in FY21, implying a contraction of 1.1 per cent in March quarter. Meanwhile, the Reserve Bank of India (RBI) projected a 7.5 per cent contraction for FY21.

RBI, which has kept its monetary policy loose while boosting liquidity to the economy, said on Thursday that growth prospects will depend on how fast India can arrest infections. Union finance minister Nirmala Sitharaman, who has limited room amid a fall in tax collections and rising public debt, said on Friday that no decision has been taken for another stimulus package.