The second wave of COVID-19 inflicts massive damage as GDP falls by record 7.3%


COVID-19 pandemic’s second wave has inflicted massive damage on the country’s economy. According to the latest data from the Government of India, there has been a decrease of 7.3% in the gross domestic product (GDP) in the year 2020-21. At the same time last year (2019-20), the loss in GDP stood at 4%. In the fourth quarter, the GDP growth rate was recorded mere 1.6%. In February, the central government itself had projected about an 8% decline in the GDP during the entire financial year 2020-21. However, the GDP figures are surprisingly better and it has suffered 0.7% less stumble as projected.

Nonetheless, the growth rate during January-March 2021 was better than the 0.5% growth in the previous quarter i.e. October-December 2020. According to the data released by the National Statistics Office (NSO), the gross domestic product grew by three percent during the January-March quarter in 2019-20.

According to the data, the size of the Indian economy contracted by 7.3% during 2020-21, as compared to the growth rate of 4% in the last financial year. The NSO had predicted that the GDP would fall by 7.7% during 2020-21. On the other hand, China has recorded economic growth of 18.3% in January-March 2021.

Chief Economic Adviser to the Government of India, K. V. Subramanian, said that the GST has increased significantly this year as compared to the last year. The GST has been increasing steadily since September last year. There has been a record increase in GST in April.

The fiscal deficit stood at 9.3% of gross domestic product (GDP) in FY 2020-21. This is lower than the finance ministry’s revised estimate of 9.5%. The Controller General of Accounts (CGA), while presenting the Central Government’s revenue-expenditure account for the financial year 2020-21, stated that the revenue deficit was 7.42% in the last financial year.

The absolute fiscal deficit stands at Rs 18,21,461 crore, which is 9.3% of GDP in percentage terms. The government had initially projected a fiscal deficit of Rs 7.96 lakh crore or 3.5 per cent of GDP for 2020-21 in the budget presented in February 2020.

In the budget of 2021-22, the fiscal deficit estimate for the previous financial year was revised to 9.5% i.e. Rs 18,48,655 crore. Estimates of the fiscal deficit were raised because of the COVID-19 pandemic and declining revenue receipts. Let us inform you that the fiscal deficit had increased to 4.6% of GDP in FY 2019-20. According to analysts, the prime reason for the increase in the fiscal deficit is lower revenue.

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