Context

The Ministry of Statistics and Program Implementation has released the First Advance Estimate (FAE) for the current financial year.

Introduction

For any financial year, the Ministry of Statistics and Program Implementation provides regular estimates of GDP. First Advance Estimates for this financial year have been released. The FAE is usually presented on 7th January for any particular financial year. This advance estimate is used by the Union Finance Ministry to decide the budget allocation for the financial year.

Indicators of First Advance Estimate

• Industrial Production (IP) for the first 7 months of the financial year
• Financial performance of listed companies in the private corporate sector is available for the quarter ended September 2020
• First Advance Estimates of Crop Production,
• Accounts of Central and State Governments
• Deposits and credits available for the first 8 months of the financial year, Railways' passenger and freight earnings, railways, passengers and civil aviation, cargo handled at major ports, sales of commercial vehicles, etc.

Key Findings from First Advance Estimates: -

GDP growth rate

• This year has seen a contraction of 7.7% in GDP which is considered to be a major change as India has recorded an average annual positive GDP growth rate of around 6.8% since the economic reforms in 1991. However, a major reason for the contraction this year is the disruption caused by the COVIDdriven lockdown.
• For the full year of 2020-21, India's GDP is likely to be Rs 134.4 lakh crore, which was Rs 145.7 lakh crore in 2019-20.

The absolute level of real GDP:-

• India's real GDP - (GDP without inflation effect) stood at Rs 134.4 lakh crore in 2020-21 which is lower than 2019-20 (143 lakh crore) and is less than the level of 2018-19 (in 2018-19 139 lakh crore)

GDP per capita:-

• India's per capita GDP will come down to Rs 99,155 in 2020-21 before its lowest level was seen during 2016-17. It was Rs 108620 in 2019-20.
• So, while real GDP will fall by 7.7 percent, real GDP per capita will fall by 8.7 percent.

The absolute level of real Gross Value Added (or GVA):-

• The GVA provides data for income earned by people involved in various fields. It covers value-added work by various sectors of the economy such as agriculture, industry, and services.
• The GVA in 2020-21 is 123.4 lakh crore which is much lower than in 2019-20. It was 133 lakh crores in 2019-20 and 128 lakh crores in 2018-19.

The absolute level of personal final consumption expenditure: -

• The greatest demand for goods and services comes from private individuals who consume to meet their needs. This will include all items that an individual or family buys in its capacity. It contributes more than 56 percent of the total GDP.
• The PFCE in 2020-21 is 75.4 lakh crores which is much lower than in 2019-20. It was 83 lakh crores in 2019-20 and 79 lakh crores in 2018-19.

Per capita personal final consumption expenditure: -

• The per capita PFCE is also a relevant standard indicating how much an Indian spends in his capacity. It is an indicator of income and consumption levels.
• The per capita PFCE in 2020-21 is Rs 55609 which is much lower than in 2019-20. It was Rs 62087 in 2019-20 and Rs 59594 in 2018-19.

The absolute level of gross fixed capital formation (GFCF)

• The second-largest component of GDP is called GFCF and measures all expenditures on goods and services that involve businesses and firms to invest in their productive capacity. It represents about 28% of India's GDP.
• The GFCF is Rs 37.1 lakh crore in 2020-21, much lower than the 43.3 lakh crore in 2019-20.

Conclusions: -

However, this year, there were wide fluctuations in economic data due to the pandemic. Especially in the first quarter (March, April, May), there was severe loss. In the first half-year of 2020-21, India produced goods and services worth Rs 60 lakh crore, much lower than the Rs 71 lakh crore of goods produced in the first half of 2019-20. But in second half -yearly of 2020-21, the ministry expects GDP to be Rs 74.4 lakh crore, which is roughly equivalent to Rs 74.7 lakh crore in the second half-yearly production of 2019-20. Therefore, from the beginning of the next financial year, India must first bring its GDP back to the level of 2019-20 (Rs 143.7 lakh crore). This will provide a positive signal for the economy.