2021 in numbers: Sectors of the economy

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The Indian economy contracted by 7.3% in the 2020-21 financial year. The Reserve Bank of India (RBI) expects it to expand by 9.5% in 2021-22 compared to the year before, which would make it 1.6% bigger than it was in 2019-20. This will mean that it is at least not going to be smaller this financial year than it was before the Covid-19 pandemic. But the Indian economy is both big and diverse. An aggregate number like the Gross Domestic Product (GDP) cannot alone capture the nature of the contraction in 2019-20 or the nature of the recovery in 2021-22. How are different parts of the economy doing in this financial year? Here are three charts that explain this.

One way of measuring the GDP is by adding up the final value of all the goods and services produced in an economy, that is after discounting or subtracting the value of intermediate goods and services. The Gross Value Added (GVA), which is the GDP after deducting subsidies and adding taxes, allows us to measure the contribution of different sectors of the economy as well as of different regions of the economy. GVA estimates are available up to the September quarter of 2021. This allows us to compare the GVA of three quarters of the calendar year 2021 with the years before.

GVA comparisons show that agriculture, which had grown by 4.6% in the first three quarters of the 2020 calendar year too, has grown 4% in the same interval this year. The industry and services sector, which were affected due to lockdowns and continue to face disruptions, have not fared so well. The industry sector contracted by 13.5% in January-September 2020 and has expanded by 16.9% in 2021. It is now 1.1% bigger than it was in 2019. However, the mining and quarrying sub-sector of industry is still smaller than it was in 2019. The services sector, which includes sub-sectors like hotels, transport, and financial services, has fared even worse. It contracted by 9.3% in January-September 2020 and expanded by 7.4% in 2021, ending up still 2.6% smaller than in 2019. The trade, hotels, transport, and communication part of services, which faces the brunt of lockdown measures and the fear of the Covid-19 virus, is largely responsible for this slower recovery in services. The government sector, a big non-agricultural sector which suffered the least during the pandemic, has expanded 8.3% in the first three quarters of 2021 and is now 4.8% bigger than in 2019.

These sector-wise numbers are important because they tell us which parts of the economy are recovering. For example, the electricity, gas and water supply part of the industry sector has grown by 8.7% in January-September 2021 compared to January-September 2019, almost the same as the agriculture sector. But it makes up only 2.3% of the GVA and employs an even smaller share – just 0.6% — of workers. This means that a big expansion in this part means little for overall value added to the economy as well as employment. Construction has grown only 0.3% compared to 2019. It makes up 8% of GVA and employs 12% of workers. Less growth in this sector will have a disproportionate impact on employment.

Similarly, not all parts of the country have an equal stake in the economy of the country. Sectors apart from the farm and government sectors – two big areas that have suffered the least in the pandemic – make up just less than 60% of GVA in states like Andhra Pradesh, Madhya Pradesh, and north-eastern states, but about 80% in states like Gujarat, Karnataka, Maharashtra, and Delhi. The economies of the latter will suffer more due to the big contraction and slow recovery in the non-farm, non-government sectors.

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