2021 in numbers: The size of the economy

With vaccinations now in progress in most parts of the world, how much has the economy recovered in 2021? Here are three charts that explain this

When the Covid-19 pandemic struck in 2020, lockdowns were among the first responses to the pandemic. With non-essential factories and shops as well as the transport that connects them shut, there was little production or consumption that could occur, and economic activity came to a near standstill. With vaccinations now in progress in most parts of the world, this has changed in 2021, allowing for the economy to recover, although new variants still cause disruptions. How much has the economy recovered in 2021? Here are three charts that explain this.

In sum, in the January-September period, the size of India’s economy was ₹108.5 lakh crore in 2019, ₹98.3 lakh crore in 2020, and is ₹107.1 lakh crore in 2021 (Vipin Kumar /HT PHOTO)

According to the World Economic Outlook report published by the International Monetary Fund (IMF) in October 2021, the world economy – represented by the Gross Domestic Product (GDP) -- contracted by 3.1% in 2020. Both “advanced economies” and “emerging market and developing economies” – so classified by the IMF on the basis of factors like per capita income, exports, integration into the global financial system and their growth rates – contracted in the year. The latter contracted less than advanced economies because China, which makes up a third of such emerging market economies, was one of the few countries that did not see a contraction in 2020. With the vaccine rollout in 2021, and on the back of a lower base, both advanced and emerging market economies are expected to grow.

The estimates above are for the calendar year. India follows an April to March financial year. Its economy shrank by 7.3% in the financial year ending in March 2021. Both the IMF and the Reserve Bank of India (RBI) expect India’s economy to grow by 9.5% in 2021-22. However, even with this growth rate in 2021-22, India’s economy will only be 1.6% bigger than in 2019-20, when the pandemic had only marginally hurt economic activity in India. Absolute values will make this clearer. India’s economy was the size of ₹140 lakh crore in 2018-19. In 2019-20 it grew ₹5.7 lakh crore to ₹145.7 lakh crore. It is expected to grow to ₹148 lakh crore in 2021-22, merely ₹2.3 lakh crore bigger than two years ago.

What happened in different parts of the year? Quarterly estimates of the size of the economy are available for India up to September 2021. These estimates, which also allow for calendar year comparisons, show that the January-March quarter was the least affected and the April-June quarter the worst hit in both 2020 and 2021. In the March quarter of 2019, India’s economy was worth ₹37.2 lakh crore. It grew by 3% in 2020 and 1.6% in 2021 to end up at ₹39 lakh crore this year. In the June quarter, it was worth ₹35.7 lakh crore in 2019. In this quarter – when a harsh lockdown was in place last year and a less strict or enforced version this year because of the Delta variant – the economy shrank the most (by 24.4%) in 2020 and has grown by 20.1% in 2021. It was still 9.2% below the 2019 level this year. In the September quarter – India’s first wave peaked at this time in 2020 and the second wave of infections was subsiding in 2021 – India’s economy contracted by 7.4% in 2020 and has grown by 8.4% in 2021. Compared to 2019, however, it is only about 0.3% bigger.

In sum, in the January-September period, the size of India’s economy was ₹108.5 lakh crore in 2019, ₹98.3 lakh crore in 2020, and is ₹107.1 lakh crore in 2021.