Will 2021 Be As Same As 2020 For The Indian Economy 2021? Here Is The Explanation

The Fiscal Year (2020-2021) started under the strictest and grossly ill-planned lockdowns; not only in India but all over the world. At that time, many of us have thought that April 2021 would be worse than April 2020 in terms of Covid. Certainly, the government estimates the previous year that no Covid cases will be there after May 2020. However, the rapid upsurge in the numbers of Covid cases could make things worse, especially for the poor sections of the Indian economy.

The below-given chart shows the Covid cases which registers a “V-shaped” recovery. As per Covid19India.org, India has 1.75 times more daily cases now as compared to the last peak (September 2020). 

What’s worse?

The worse is the new surge is falling out in spite of awareness about following the Covid-19 safety protocols and the availability of multiple Covid vaccines as well. Vaccination mismanagement by the government — different places declared shortages of vaccination as well a not keeping social distancing by the people affects the current spike.

How Does This Affect The Indian Economy 2021?

With this upsurge, the first half of the existing financial year (April – September) was expected to register a “V-shaped” recovery, but this V-shaped recovery is different from the V-shaped spike in Covid-19 cases. 

It is because the recovery in economic growth from April to September of the financial year will be an optical one. It means that the GDP diminished by 15% between April to September of the last financial year. Thus, the low base effect will make sure that the Gross Domestic Product growth rate looks to increase in the first half of the current Indian economy.

The below chart will help in understanding this clearly:

As per Crisil, GDP is expected to approx. 2% higher than as compared to March 2020 by the end of 2021-22. However, still, the GDP would be 10% below its pre-pandemic trend level.

In the above figure, the red line represents the pre-Covid trend and the black line for the new trend. This gap shows the perpetual loss of 11% of GDP in real terms over the fiscal years 2021-22 through to 2024-25 that the Indian economy will suffer even after the expected recovery.