7.7% GDP fall in FY21 likely: Govt

The National Statistical Office (NSO) forecast on Thursday projected India’s real gross domestic product (GDP) in FY21 to be 7.7% lower than in FY20 and 3.9% lower than even the FY19 level in absolute term. This estimate is, however, narrower than those by various other agencies including the IMF (10.3%), World Bank (9.6%) and other prominent global rating agencies, but a bit worse than RBI’s latest forecast of 7.5%.

Hinting at a resilient recovery, the NSO’s estimate of contraction for the second half is merely 0.1%. It expects the nominal GDP to contract by 4.2% in the current fiscal and pegs it at Rs 194.82 lakh crore. Meanwhile, analysts in the country expect the fiscal deficit to remain at a very elevated level in FY22 since the government is bound to pump-prime the economy.

“We assess that the government may revise upwards, its borrowing target so as to exceed 7% of 2020-21 nominal GDP and signal a move towards restoring fiscal consolidation in a limited way in the budget estimates for 2021-22,” DK Srivastava, chief policy adviser at EY India, commented.