Amidst the chaos of recessionary period for current fiscal year economic growth fell to 3.1 percent- lowest witnessed in last 17 years. GDP plunged to 11-year low of 4.2 percent in 2019-20 still lower than the government projection of 5 percent. Fall in GDP primarily due to private investment and manufacturing hit hard due to COVID-19 lockdown. As per Pronab Sen projected a 10.8 percent contraction in GDP for current financial year if no further stimulus is provided. 

Even before the lockdown, the economy was sloping downward despite the Centre released huge corporation tax cuts it just grew by 4.2 percent in FY20, not only lowest since Modi’s rule but also lower than FY13 which stood at 5.5 percent. For current year already industrial production and exports are record lows. Joblessness drifted between 7-8 percent till February and after lockdown it surged to record levels. The Centre’s fiscal deficit has widened to 4.6 percent of GDP in FY20 compared to original target of 3 percent. Depressed crude oil prices and lack of demand had a positive effect on current account deficit. It was near to 0 percent of GDP in the Q3 of FY20. Fuel and Retail inflation have declined because of lower oil prices and lack of demand. The fall in bond yields and interest rates is also a silver lining.

However, since banks haven’t fully passed on the gains to customers, and India Inc is facing low utilization levels, due to poor operating leverage many companies are facing losses.

Facts & Figures for segments which have been affected due to crisis. 


  • It contracted 1.4 percent in Q4 against a 0.8 percent fall in Q3.
  • Third straight quarter of decline in manufacturing gross value added. It expanded by 0.03 percent in 2019-20 compared with 5.7percent in previous fiscal year


 This segment in GDP data is the only one which witnessed growth

  • Grew by 5.9 percent in Q4 against 3.6 percent in Q3
  • For whole year it grew by 4 percent against 2.4 percent a year ago.


Due to current lockdown scenario and monsoon arrival may further dampen the growth in this segment

  • Witnessed contraction of 2.2 percent in Q4 against fall of 0.04 percent in Q3.
  • Yearly basis for FY20, growth rate fell to 1.3 percent from 6.1 percent as compared to previous year


  • Segments; financial services, real estate and others declined to 2.4 percent in Q4 as compared to Q3 which was 3.3 percent.
  • Yearly basis;growth plunged to 4.6 percent in FY20 against 6.8 percent previous year.


Services areas like – trade, hotels, communication and transport was dampened due to hospitality segment.

  • Growth in Q4 is 2.6 percent as compared to 4.3 percent in the Q3.
  • Yearly basis; growth plunged to approx half to 3.6 percent in FY20 against 7.7 percent a year ago.


  • Gross Fixed Capital Formation (GFCF) declined third quarter straight by 6.4 percent in Q4.
  • Yearly basis; it contracted 2.8 percent in 2019-20, in contrast to a 9.8 percent expansion in the previous fiscal year.
  • The share of investment in GDP fell to 26.9 percent in FY20 from 27.5 percent as per the government’s second advance estimates.

Government spending

  • Government final consumption expenditure grew at same rate which is 13.6 percent in Q4 against 13.4 percent in Q3.
  • Yearly basis; current fiscal year expenditure rose by 11.8 percent as against 10.1 percent in previous year.

Domestic Demand (Private final consumption expenditure)

  • Domestic demand grew by just 2.7 percent in Q4 against 6.6 percent in the previous quarter.
  • Yearly basis; It rose 5.3 percent in FY20 against 7.4 percent in the previous financial year.

The COVID-19 stimulus package which claims to be 10 percent of GDP does not appear enough to bring economy back on track as impact and its effect on economy with financial aid is only 1 percent of GDP. As per RBI India’s GDP growth will be in negative territory in 2020-21. 

by Niyati Bhagat


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