Our country’s Gross Domestic Product (GDP) estimates for the January-March quarter (Q4) were published on May 31, 2021. GDP is the money value of all finished goods and services produced within a country during a specific period. After India’s GDP growth dropped to a record low of -24.4% in the April-June quarter (Q1), the economy had shown great signs of recovery in the succeeding quarters. A sharp recovery is evident in the estimated GDP figures for Q4 as well.

Let us look at some of the key highlights of the data released by the Ministry of Statistics and Programme Implementation (MoSPI).

Main Highlights

  • India’s GDP grew by 1.6% in the January-March quarter (Q4 FY21). GDP at constant prices (based on 2011-12 levels) in Q4 FY21 stood at Rs 38.96 lakh crore. According to estimates, GDP grew by 0.4% in the quarter ended December (Q3). 
  • The GDP for the entire financial year 2020-21 (FY21) contracted by (-)7.3%, compared to a growth of 4.18% in FY20.
  • In gross value-added terms (GVA), the economy contracted by (-)6.2% in FY21. GVA, which is a more accurate way of assessing the economy, grew 3.7% in Q4. This is compared to a 1% growth in the previous quarter (Q3).
  • GDP based on current prices in FY 2020-21 is estimated at Rs 197.46 lakh crore.

Sector-Wise Results

We had expected a good recovery in the manufacturing sector. There were multiple data sets from various sources (monthly auto sales data, PMI, etc) which showed that industrial activity in India had improved. This was mainly on account of higher demand amidst the gradual removal of almost all lockdown restrictions. The manufacturing sector showed a strong growth of 6.9% in Q4, compared with just 1.7% growth in Q3. The agriculture sector grew 3.1% in the January-March quarter. It is the only sector that has shown positive growth throughout the financial year 2020-21.

The table below shows the sector-wise growth of India’s economy over the previous quarters:

Some Noteworthy Sectoral Growth Rates:

  • The construction sector posted a very strong recovery from Q1 levels. It grew 14.5% in Q4, compared to a growth of 6.5% in Q3.
  • Trade, hotel, transport, and communication sector narrowed its contraction to 2.3% in Q4. It had contracted by 7.9% in Q3. This sector has been the worst hit by the Covid-19 pandemic.
  • The finance and real estate sectors posted a growth of 5.4% in Q4, compared to a growth of 6.7% in Q3.

Performance of Eight Core Industries in April 2021

The eight core industries comprise nearly 40.27% of the weight of items included in the Index of Industrial Production (IIP). The IIP is an index that tracks manufacturing activity in different sectors of the economy. According to data released by the Ministry of Commerce, growth in the eight core sectors rose sharply by 56.1% year-on-year (YoY) in April. This is mainly due to the low base effect (as India was under strict lockdowns in April 2020) and a massive increase in steel and cement output. The total output of these core sectors recorded a contraction of (-)15.1% in April 2021 when compared with March 2021 (month-on-month).

Core IndustryGrowth in April 2021 (YoY)
Crude Oil-2.1%
Natural Gas25%
Refinery Products30.9%

India’s Expenditure During Q4

  • Private consumption grew 2.7% in Q4, compared to a contraction of 2.8% in Q3. This refers to the money spent by all people in our country. The overall contraction of 9.1% in FY21 shows how Indians had cut back on their expenditure as income levels fell and many lost their jobs. There was a huge decline in spending due to restrictions placed on mobility and delivery of non-essential items by e-commerce firms.
  • Investments (or Gross Fixed Capital Formation) grew by 10.9% in Q4, compared to a growth of 2.6% in Q3. These are investments made by private players into local entities and businesses in India. Over the past few months, we have seen a series of investments and acquisitions being conducted in our country.
  • Government expenditure grew sharply by 28.3% in Q4, after contracting by 1% in Q3. This shows that the Centre has focused on ramping up public expenditure to control the effects of the economic downturn caused by the Covid-19 pandemic. The government and RBI had announced a series of measures to help revive growth. It has also procured essential Covid-19 vaccines for the public.


The GDP figures for Q4 and the entire financial year 2020-21 were better than analysts’ estimates. Almost all sectors of the economy had posted strong positive growth. There was a major revival in overall demand in the second half of FY21, and recovery had gained strength. Indians had just begun to buy/consume more after lockdowns were eased, and the government focused on increased spending to support economic growth. The cement and steel industries have thrived over the past few months as a result of higher demand and prices. Construction activities had resumed and were in full swing. Things were looking very promising.

This was until the second wave of the Covid-19 pandemic struck the nation. Unfortunately, we are back in the same situation as last year. Almost all states went into strict lockdowns as Covid-19 cases started peaking in April-May. Our healthcare system had completely collapsed, and people could not receive adequate treatment. Many companies were forced to close down their production units, and construction activities have been hit. Private consumption in India is likely to fall significantly (again). The economic recovery that we witnessed towards the end of the previous financial year (FY21) has lost strength. 

India is critically lagging behind other countries in terms of vaccination rates. The country must focus all its efforts on ensuring access to Covid-19 vaccines and medicines to all citizens. The health sector needs complete support now more than ever. Ultimately, the GDP growth in FY22 will depend on these factors. Interestingly, India’s Chief Economic Adviser Krishnamurthy Subramanian and many analysts have stated that the economic impact of the second wave is unlikely to be very large. Let us look forward to seeing how the concerned authorities tackle these pressing challenges.