According to the National Statistical Office (NSO), the Gross Domestic Product (GDP) at 'Constant (2011-12) Prices' in Q1 of 2020-21 is estimated at Rs 26.90 lakh crore, as against Rs 35.35 lakh crore in Q1 of 2019-20, showing a decline of 23.9 per cent.

 

In financial parlance, a GDP contraction not only indicates the economy's movement towards a recession, but also underlines the reduction in purchasing power along with lower taxes for the government, higher defaults on debt and falling capex spends.

 

Though not comparable, the GDP had grown by 5.2 per cent in the corresponding quarter of FY2019-20.

 

In the quarter just preceding Q1FY21, the economic growth was at 3.1 per cent.

 

The country had observed mobility restrictions as mandated under the lockdown measures for the better part of the first quarter of FY21. It was only on June 1 that partial unlock measures were implemented.

 

However, a contraction at this scale is unprecedented and never been witnessed since the current practice of quarterly series data dissemination began in the late 1990s.

 

"As the world economic outlook has highlighted, the fraction of countries, where GDP per capita would decrease, is the highest since 1870, so once in a one and a half century event is what we are going through," said Chief Economic Adviser to the Government, Krishnamurthy Subramanian, commenting on the Q1FY21 GDP data.

 

"India was also in a 'lockdown' all through the April-June quarter with the majority of economic activities being restricted, so this trend is along the expected lines."

 

In a poll of economists, IANS on August 29 had predicted that the economic impact of Covid-19 on India's GDP is expected to be anywhere between 17 and 30 per cent during Q1FY21.

 

The NSO, in the Q1FY21 GDP estimates of 2020-21, said: " GDP at constant (2011-12) prices in Q1 of 2020-21 is estimated at Rs 26.90 lakh crore, as against Rs 35.35 lakh crore in Q1 of 2019-20, showing a contraction of 23.9 per cent as compared to 5.2 per cent growth in Q1 2019-20."

 

"Quarterly GVA at basic price at constant (2011-12) prices for Q1 of 2020-21 is estimated at Rs 25.53 lakh crore, as against Rs 33.08 lakh crore in Q1 of 2019-20, showing a contraction of 22.8 per cent."

 

The GVA includes taxes but excludes subsidies.

 

On a YoY basis, Q1 GVA for 2020-21 from the agriculture, forestry and fishing sector showed a growth of 3.4 per cent, against 3 per cent in the same quarter of 2019-20.

 

Nevertheless, the GVA in Q1 2020-21 from the manufacturing sector de-grew (-) 39.3 per cent, as compared to a growth of 3 per cent in the corresponding quarter of the previous fiscal.

 

Similarly, the mining and quarrying sector declined by (-) 23.3 per cent against previous year's growth rate of 4.7 per cent.

 

"With a view to contain spread of the Covid-19 pandemic, restrictions were imposed on the economic activities not deemed essential, as also on the movement of people from March 25, 2020. Though the restrictions have been gradually lifted, there has been an impact on the economic activities as well as on the data collection mechanisms," the NSO said.

 

"The timelines for filing statutory returns were also extended by most regulatory bodies. In these circumstances, the usual data sources were substituted by alternatives like GST, interactions with professional bodies etc. and which were clearly limited."

 

As per the NSO statement, the data challenges in the case of other underlying macro-economic indicators like IIP and CPI, used in the estimation of 'National Accounts' aggregates, will also have implications on these estimates.

 

Commenting on the GDP data, Deepak Sood, Secretary General, Assocham said that with the bulk of the economic activities, particularly in the pandemic-hit metro cities and the most industrialised states, remaining largely locked down or severely restricted, GDP contraction of 23.9 per cent in the first quarter of FY'21, though discomforting, is on the expected lines.

 

"Though the second quarter, July-September, saw calibrated unlocking of the economy, several key services sectors like hotels, hospitality, airlines, and railways are operating at a bare minimal level. So, Q2 is also expected to be challenging. However, we are hopeful that things would start picking up from the third quarter and right through the second half of 2020-21," he was quoted as saying in a statement.

 

ICRA's Principal Economist Aditi Nayar said: "As anticipated, construction, manufacturing and trade, hotels, transport, communication and services related to broadcasting, which together account for 45 per cent of the economy, drove the deep contraction seen in Q1 FY2021."

 

"Agricultural growth, which benefited from the favourable rabi harvest, nevertheless printed modestly lower than our forecast of 4 per cent. Excluding agriculture, GVA contracted by an even sharper 26.8 per cent in Q1 FY2021."

 

"The wide discrepancy between the double-digit growth of government final consumption expenditure on the expenditure side, and the contraction in public administration, defence and other services on the production side, is rather incongruous."

 

Acuite Ratings & Research Group CEO Sankar Chakraborti said: "Expectedly, government expenditure has increased by 16.5 per cent, pulling up its share in overall GDP to 18 per cent but its ability to offset the massive decline in consumption is limited. The impact of the disruption is also seen in gross capital formation which slipped by 47.1 per cent in Q1 and is also reflected in the weak credit offtake figures."

 

"The particularly large contraction in construction, retail and transport services along with that in manufacturing, has been clearly driven by the lockdown; except for retail and transport, most of these activities are likely to see a meaningful revival in Q2. The impact of the lockdown, however, has been the least in the financial sector and government services where the decline has only been to the extent of 5-10 per cent, partly also reflecting the effectiveness of work from home model."