RTTNews | Jan 8, 2021 12:52AM EST

00:51 Friday, January 8, 2021 (RTTNews.com) - India's economy is set to shrink sharply in the current financial year as measures to control the coronavirus pandemic weighed on spending and investment, the Ministry of Finance said Thursday.

According to the first advance estimates, the economy will shrink 7.7 percent in the financial year ending March 2021. This was bigger than the 7.5 percent decrease estimated by the Reserve Bank of India.

Early this week, the World Bank had projected India's gross domestic product to fall more sharply by 9.6 percent in FY 2020-21 due to weak household spending and private investment.

On the expenditure side of GDP, only government spending is expected to grow in 2020-21, with expenditure up 5.8 percent. The decline in private consumption is seen at 9.5 percent and that in fixed investment at -14.5 percent.

Exports and imports are estimated to decrease 8.3 percent and 20.5 percent, respectively. In nominal terms, GDP is forecast to contract 4.2 percent in 2020-21.

The continuous quarter-on-quarter growth endorses the strength of economic fundamentals of the country to sustain a post-lockdown V-shaped recovery, the ministry said.

The government has started preparations for mass vaccination drive. However, while the impending vaccination is drawing closer, continued observation of "covid-appropriate" behavior, caution and surveillance is crucial, the government said.

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