New Delhi: A sharp increase in kharif sowing, pick-up in electricity consumption, and higher freight movement by road and railways are indicative of emergence of green shoots in the economy, the finance ministry’s monthly economic outlook report for the month of June said.
It also cited higher retail financial transactions, pick-up in consumption of petroleum products and improvement in purchasing managers index to state that the economy is showing signs of early recovery.
However, it flagged that the pandemic is likely to affect business climate and push firms to delay their investment plans.
“These green shoots have a conducive policy environment to grow further and nudge the economy early on the path of economic recovery and growth,” said the report.
“With huge uncertainty around the pandemic stemming from the unknown, and the inability to plan for or know what’s next, such uncertainty is expected to adversely affect business climate and make firms delay their investment plans,” it said.
Data from CMIE (Centre for Monitoring Indian Economy) shows that fresh capex investments have crashed in the April to June quarter.
Only Rs 0.56 lakh crore of fresh investments towards capital expenditure were made in the quarter ended June, as against Rs 3.37 lakh crore in the quarter ended March and Rs 5.15 lakh crore in the quarter ended December.
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The green shoots
In its report, the finance ministry cited the lower contraction in electricity consumption in June and improvement in petroleum products consumption.
Electricity consumption contracted by 11.3 per cent year on year in June, as against 24 per cent in April and 15 per cent in May. Year on year contraction in consumption of petroleum products also moderated in May compared to April.
Freight movement by road also showed improvement if one goes by e-way bills and electronic toll collection data. E-way bills have been growing month on month, with the value of e-way bills generated in June registering a growth of 30 per cent over May.
Electronic toll collection also increased to Rs 51 crore in June, from Rs 37 crore in May. Railway freight data is also picking up, the finance ministry said.
On the agriculture front, the report pointed out sowing for kharif is up by 104 per cent and rabi procurement is on track for oilseeds, pulses and wheat due to the bumper harvest.
Despite the early recovery signs, many economists project India to contract in the range of 5-12 per cent in 2020-21.
The report said inflation is expected to remain benign despite an increase in fuel prices.
“Petrol and diesel rates have also witnessed consecutive rises across metro cities in June, driven by base price hikes by oil companies and excise duties raised by governments. While there has been a moderate recovery in fuel prices, the overall inflation outlook continues to remain benign notwithstanding the supply shocks acting on food inflation,” the report added.
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