The Indian Economy This Far This Year

The Plunge

Last year was a mess for every major economy. Widespread unemployment together with the lockdowns was like the perfect combination for an economic disaster. Like any major country(except China), India too had negative GDP growth – around -6%. With unemployment rates for the 2 months of complete lockdowns last year, India had unemployment rates of 23% and 21% according to CMIE. This, for a country with the second most population and a substantial working class population is HUGE. In the case of the bourses, the Sensex fell about 25% during the last weeks of March which was the largest fall in such a short period. While already the Indian economy was on the path of slow growth until then, the pandemic cast an even darker shadow over its future.

The Harbinger of Expansion

But, the future had much in store for India. Throughout the second half of the year, the economy got back on its feet with demand growing for the products in many industries like wildfire. This included FMCG, metals, and, of course, Tech, among others. This was stimulated by historically low interest rates around the world and many central banks pumping boatloads of money. Its main implications were: –

Foreign and Domestic Institutional Investments

According to the report by UN Conference on Trade and Development, For 2020, India got about $57 billion, 13% higher YoY making it the highest rate compared to any other country. Most of the investment was in the digital-tech sector.

Domestic Retail Investments

These refer to those made by individuals.
There is only so much you can save and keep in bank deposits. And when you’re at home and the markets are at the lowest they can be, one cannot resist the urge to buy them up at such dirt prices. The total number of demat accounts opened during last year rose 27% to touch 50 million.

All these led to Sensex breaching the 50,000 mark in late Jan 2021, when it rebounded about 90% compared to its lowest, less than a year ago. This brought back all the fervor the market was hoping for.


The budget was surely growth oriented. It focused more on supply side. There were no changes in Tax rates. No Covid tax or anything. FDI was allowed in insurance companies upto 74% as against 49% previously. Extension of start-up tax holiday and window for capital gains exemption for investment in start-ups till March next year.

These among other such measures made investors happy. That was evident in the rally of the markets on that day. Sensex closed up 2476 points or 5.35 per cent to 48,762, while the Nifty 50 ended at 14,331, up 696 points.

The 2021 budget beats the 1991 reforms

Vallabh Bhansali – Chairman, Enam Group.

Monetary Policy Committee Meeting

Though there are many aspects of the MPC meeting, the following were the most significant ones: –

  • The RBI MPC meeting in April continued the status quo of Repo Rate at 4% and Reverse Repo at 3.5%.
  • It announced the Government Securities Acquisition Program which basically provides a timeline on its Open Market Operations which will in-turn help to keep the bond yields lower. Lower bond yield will make stocks attractive as it gives a higher return.

IMF World Economic Outlook

The IMF raised its GDP numbers for India to 12.5% for 2021 from an 8% contraction previous year. he IMF forecast was based on improvement in economic activity, normalization, and recovery in high-frequency indicators, IMF Chief Economist, Gita Gopinath said. The numbers were locked in on March 5 when the second wave had just started. As such the cost of lockdowns, if any were not taken into consideration.

Meanwhile, the IMF has said India is the only country expected to register double-digit growth this fiscal.  On the other hand, after an estimated contraction of -3.3 per cent in 2020, the global economy is projected to grow at 6 per cent in 2021, moderating to 4.4 per cent in 2022.


Talking about India in 2021, one cannot not talk about the IPO and Unicorn Frenzies. Watch out for that in the issue live in 2 days!

Shreesha S
Shreesha S

Shreesha is a Qualified Certified Management Accountant(CMA) and Certified in Strategy and Competitive Analysis(CSCA).

Articles: 195


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