Govt to increase spending; economic recovery anticipated in H2 FY21

India's real GDP will contract by 7.7 per cent in 2020-21, according to First Advance Estimates of National Income released by Ministry of Statistics and Programme Implementation (MOSPI). But the economy is expected to return to normalcy in the second half of the year. Shivani Sharma, Pragati Srivastava

The first advance estimates imply a sharp reduction in YoY contraction of private final consumption expenditure (PFCE) to 0.6 per cent in the second half of 2020-21 from an 18.9 per cent contraction in the first half of the year. For the year as a whole, the government projects PFCE to contract by 9.5 per cent.

The government projects itself to lead the economic recovery in the second half of 2020-21 by scaling up its final consumption expenditure by 17 per cent over its year-ago level. The central government had adopted a conservative approach towards spending in the first half.

The government has projected gross fixed capital formation (GFCF) to contract by 14.5 per cent in 2020-21. After having slumped by 28.1 per cent in the first half of the year, its YoY fall is projected to alleviate to 0.8 per cent in the second half.

The fall in exports is also projected to moderate to 5.8 per cent from 10.7 per cent.

The government projects YoY fall in imports to come down substantially to 11.3 per cent in the second half of 2020-21 from 29.1 per cent in the first half, in line with the recovery in both consumption and investment demand in the domestic market.