One of the most distressing years by far, 2020 marked the year of a deadly pandemic that drastically impacted health, businesses, and communities across the globe. The Indian economy also got battered due to the subsequent lockdown which exposed gaps in the supply chain and delays in working around the social distancing norms. Critical indicators such as de-growth in the economy, contraction in GDP, widening of fiscal deficit, and high inflation have highlighted the severe strike on the economy in the past year.

But as it is said, 'There is hope after despair and many suns after darkness', similarly, the Indian economy has started showing signs of recovery. Faced with the daunting twin tasks of pulling back the economy from the clutches of de-growth, a slew of fiscal and non-fiscal measures were taken during the year to rebound the economy from the aftermath of the pandemic. This is evidenced by the pre-budget Economic Survey's projection of 11% growth in real GDP for 2021.

Pre-budget, Hon'ble Finance Minister Nirmala Sitharaman hinted that Budget 2021 would be hailed as a "never before Budget." Public sentiment developed to expectations and raised curiosity regarding the growth and policy path to provide the requisite momentum to India's sustainable economic recovery

Laying a vision for AtmaNirbhar Bharat, the Hon'ble Finance Minister has rested the budget proposals on six pillars – health and wellbeing, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and R&D, and minimum government - maximum governance.

With an aim to provide the impetus for growth revival, the Budget has largely focused on aspects of key areas such as healthcare improvement, infrastructure boost, supports for the MSMEs, skill development, etc.

On the direct tax landscape, various proposals such as setting up the Dispute Resolution Committee, relief to senior citizens, further measures to facilitate faceless tax processes, pre-filling of returns, etc., have been added to simplify the tax administration, ease compliance, and reduce litigation. Furthermore, in line with the overall objectives as envisioned in the pillars, measures for attracting foreign investment to the infrastructure sector, affordable housing/rental housing, tax incentives to IFSC, and start-ups have been announced.

The indirect tax front has proposals for rationalizing the customs duty provisions by revising its structure, sector-specific changes in the customs duty rates, and rationalizing certain procedures and easing compliances.

Overall, against the backdrop of the fiscal constraints within which the Finance Minister had to operate, the measures announced seem to be in the right direction. These measures may accelerate overall growth along with healthcare development, consumption surge, and provide support to infrastructure developments, if implemented in the time to come.

Economic Overview

GDP Growth

  • In FY 2019-20, India registered GDP growth of 4%. However, in FY 2020-21, the COVID-19 pandemic led many international organizations to revise their growth predictions.
  • Global GDP growth was projected to grow negatively at 4.9% for FY 2020-21.
  • The Economic Survey 2020-21 has estimated negative GDP growth at nearly 23.9% for Q1. However, a V-shaped recovery can be seen as Q2 of FY 2020-21 registered a negative growth rate of 7.5%.
  • While there has been negative GDP growth in the first two quarters of the financial year, a full economic recovery is expected once the pandemic is over. The manufacturing and distribution of the vaccines made in India are likely to boost GDP growth while re-opening employment opportunities.

Index of Industrial Production (IIP)

  • The IIP is estimated to have significantly reduced for FY 2020-21. In comparison, IIP for the three preceding financial years has been steady around the 4% mark.
  • The stark fall is primarily due to the nation-wide lockdown imposed in the latter half of March, extending to the end of May 2020. Many organizations continued to limit the numberof people attending workplaces even after the lockdown came to an end, to curtail the viral outbreak and safeguard their employees.
  • The index of eight core industries, which make up approximately 40% of the index, registered a negative growth of 2.6% in November 2020 as compared to a growth of 0.7% in November 2019 and negative growth of 0.9% in October 2020.


  • Headline inflation, based on Consumer Price Index – Combined (CPIC), averaged 6.6% during April -December in FY 2020-21 mainly due to a rise in food inflation and a build-up in vegetable prices. This increase in inflation is greater than the same period in the previous year, which registered a rise of 4.1%.
  • Wholesale Price Index (WPI) inflation has been following a downward trend over the past two years. This year continues to follow the trend with WPI for FY 2020-21 estimated to be negative 0.1%.
  • CPIC inflation was caused primarily due to a rise in food inflation, whereas the decrease in WPI inflation was mainly caused due to the volatility in global crude oil prices. While demand was subdued by minimal economic activity, supply chain disruptions added to the rise in prices.


  • Total exports during April-December in FY 2020-21 amounted to USD 200.8 billion, registering a decline and negative growth of 15.7% as compared to negative 2.4% during the same period of the previous year.
  • India's merchandise exports fell by 21.1% in H1 of FY 2020- 21, whereas imports fell more drastically by 38.8% in the same period.
  • Agriculture, drugs and pharmaceutical products, and ores and minerals were the only exports that registered a positive growth (within non-POL or 'Petroleum, Oil, and Lubricant' exports). However, key commodities such as organic and inorganic chemicals, electronic goods, textiles & allied products, engineering products, gems, and jewelry pulled export growth down.

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