Gross domestic product will contract 7.7% in the financial year ending March 2021, the statistics ministry said in its first advance estimate published Thursday. That’s more pronounced than a 7.5% drop forecast by the Fed. Bank of India, as well as economists surveyed by Bloomberg.
Estimates may undergo sharp revisions due to disruptions caused by measures to contain the pandemic, said the statistics office, which had suspended data collection to coincide with a national shutdown.
The rupee fell 0.3% to close in Mumbai on Thursday before the data was released, while sovereign bonds barely changed.
Despite one of the tightest lockdowns from the coronavirus, India is now home to the second highest number of virus infections in the world, which at more than 10.4 million has prevented the government from fully reopening the economy. The nation’s GDP contraction will also be the first since 1980, when the economy contracted by 5.2%, and is projected to be the worst drop in Asia after the Philippines’ estimated drop of 8.5% to 1.5%. 9.5%.
But unlike the Southeast Asian economy, which is expected to extend the decline for the second year in a row in 2021, economists forecast that India will rebound strongly in the next financial year starting April 1, helped by a series of shocks. fiscal and monetary steps. For now, the country is in recession after two consecutive quarters of GDP contraction.
“While weak global growth and a sudden shift in national pandemic control are key short-term risks, in the medium term, more favorable financial conditions, stronger global demand, and accelerated vaccinations could lead to a cycle of economic recovery in 2021 “, Sonal Varma and Aurodeep Nandi. economists at Nomura Holdings Inc in Singapore wrote before the data was released.
India this month granted emergency approval for the vaccine developed by AstraZeneca and the University of Oxford, paving the way to begin inoculations of its population of around 1.3 billion. Covaxin developed indigenously by Bharat Biotech has also been approved for restricted use.
Calls are growing for the innovation drive to be complemented by increased support from those responsible for fiscal and monetary policy. While Finance Minister Nirmala Sitharaman will present the government’s annual budget on February 1, the RBI’s Monetary Policy Committee will decide on interest rates later that week.
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