MACRO-ECONOMIC FRAMEWORK STATEMENT 2021-22

 

MACRO-ECONOMIC FRAMEWORK STATEMENT 2021-22

Overview of the Economy

The Indian economy was negatively impacted by an unprecedented health crisis in 

2020-21 with the highly contagious corona virus (Covid-19) spreading across the 

country. In response to the pandemic, Government has taken several proactive preventive 

and mitigating measures starting with progressive tightening of international travel, issue 

of advisories for the members of the public, setting up quarantine facilities, contact 

tracing of persons infected by the virus and various social distancing 

measures. Government imposed a strict 21 days nationwide lockdown from 25th March, 

2020, under the Disaster Management Act, 2005, with subsequent extensions and 

relaxations, to contain the spread of Covid-19 while ramping up the health infrastructure 

in the country. The lockdown measures, imposed to contain the spread of Covid-19 

pandemic in India, ubiquitously affected employment, business, trade, manufacturing, and 

services activities. The real Gross Domestic Product (GDP) growth is projected to 

contract by 7.7 percent in 2020-21 as compared to a growth of 4.2 percent in 2019-20. 

GDP growth, however, is expected to rebound strongly in 2021-22 owing to the reform 

measures undertaken by the Government.

 The Government announced a special economic and comprehensive package 

under Atmanirbhar Bharat of ` 20 lakh crore - equivalent to 10 percent of India’s GDP –

to fight the Covid-19 pandemic in India. Several structural reforms announced as part of 

the package, inter alia, include deregulation of the agricultural sector, change in 

definition of MSMEs, new PSU policy, commercialization of coal mining, higher FDI 

limits in defence and space sector, development of Industrial Land/ Land Bank and 

Industrial Information System, Production Linked Incentive Schemes, revamp of 

Viability Gap Funding scheme for social infrastructure, new power tariff policy 

and incentivizing States to undertake sector reforms. Apart from this, various steps were 

taken to boost consumption which, inter alia, includes cash payment in lieu of the Leave 

Travel Concessions (LTC) scheme, One-time special Festival advance of ` 10,000 

(interest-free) for central Government employees. Other steps such as Interest-free 50-

year loan to states, additional capital expenditure budget for the central Government, 

launch of Emergency Credit Line Guarantee Scheme (ECLGS) 2.0, ` 1.46 lakh crore 

boost for manufacturing through Production-linked incentives for ten Champion Sectors, 

` 18,000 crores additional outlay for PM Awaas Yojana (PMAY) –Urban, Equity 

infusion in National Investment and Infrastructure Fund (NIIF) Debt Platform, Demand 

booster for Residential Real Estate Income Tax relief for Developers & Home Buyers, 

Boost for Project Exports, Capital and Industrial Stimulus has been initiated to support economic growth.

Economic growth

As per the first Advance Estimates of annual national income released by the 

National Statistical Office (NSO), Real GDP is estimated to contract by 7.7 per

2020-21, as compared to a growth of 4.2 percent in 2019-20. This contraction in GDP 

growth is mainly attributed to the contraction in industry and services sector. The growth 

of Gross Value Added (GVA) at constant (2011-12) basic prices is estimated to contract 

by 7.2 percent in 2020-21, as compared to a growth of 3.9 percent achieved in 2019-

20. Positive growth in real GVA in agriculture & allied sectors at 3.4 percent in 2020-

21 against 4.0 percent in PE of 2019-20 indicates resilience of rural economic 

activity to the Covid-19 pandemic. From the demand side, private 

consumption expenditure is estimated to contract at 9.5 percent in 2020-21 as against a 

growth of 5.3 percent in 2019-20 and fixed investment is estimated to decline by 14.5 

percent in 2020-21 as against 2.8 percent in 2019-20. Government consumption final 

expenditure is estimated to grow at 5.8 percent in 2020-21 as against 11.8 percent in 

2019-20. Exports and imports of goods and services are estimated to contract at 8.3 

percent and 20.5 percent (at constant prices) respectively in 2020-21.

Prices

Inflation based on Consumer Price Index-Combined (CPI-C) has moderated from 

5.9 percent in 2014-15 to 3.4 percent in 2018-19 and 4.8 percent in 2019-20. It averaged 

6.6 percent in 2020-21 (Apr-Dec) and stood at 4.6 percent in December 2020. Food 

inflation based on Consumer Food Price Index (CFPI) declined from 6.4 percent in 2014-

15 to 0.1 percent in 2018-19 and recorded 6.7 percent in 2019-20. It averaged 9.1 percent 

in 2020-21 (Apr-Dec) and stood at 9.5 percent in November 2020 but drastically declined 

to 3.4 percent in December 2020. Inflation measured in terms of Wholesale Price Index 

(WPI) declined from 4.3 percent in 2018-19 to 1.7 percent in 2019-20. It averaged (-) 0.1

percent in 2020-21 (Apr-Dec) and stood at 1.2 percent in December 2020.