New Delhi: The Indian economy is “riding against” the Covid-19 wave — as reflected by the falling number of new cases as well as a V-shaped economic recovery — but the spread of the new mutation of the virus, first reported in the United Kingdom, poses a key downside risk, the finance ministry said Tuesday.
In its monthly economic review for December, the ministry said the improvement in the high frequency indicators raises optimism that economic performance will be much better in the second half of financial year 2020-21.
“The effective management of Covid-19 spread despite the festive season and onset of winter season, combined with sustained improvement in high frequency indicators and V-shaped recovery along with easing of lockdown restrictions distinguish Indian economy as one riding against the Covid wave,” the report said.
“The management of the Covid-19 spread has been effective despite the festive season and onset of winter season. The downside risk, however, remains the spread of the UK variant and fatigue from social distancing guidelines,” it added.
The Indian economy reported its sharpest economic contraction of 23.9 per cent in the April-June quarter before improving marginally to report a contraction of 7.5 per cent in the July-September quarter. The Reserve Bank of India (RBI) has expressed optimism that the economy may record positive growth in the October-December quarter.
Full-year GDP growth is estimated at -7.5 per cent by the RBI.
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‘Vaccination will spur recovery globally’
The finance ministry’s review said India has been successful in bending the Covid infection curve, and predicted that the impending vaccination drive will spur economic recovery globally.
After peaking in the middle of September, the spread of Covid-19 had slowed down in India. However, the discovery of the fast-spreading Covid strain in the UK has again raised fears of a fresh surge.
So far, 58 cases of the new Covid strain have been detected in India. In all, the number of Covid-19 infections reported in India is over 1.03 crore, with over 1.49 lakh deaths.
Agriculture the bright spot
The monthly economic review said the agricultural sector remains the bright spot in the Indian economy, as reflected by a “year-on-year growth of 2.9 per cent in rabi sowing, accelerating tractor sales, and reservoirs’ live storage at 122 per cent of decadal average”.
High frequency indicators like rail freight movement, power consumption, e-way bill generation, toll collections and record revenues from the goods and services tax in December point to economic recovery, the finance ministry explained.
Steel production is also improving month-on-month, and construction activity is also gaining pace. The increase in the trade deficit due to a sharp surge in imports is indicative of an acceleration in domestic activity, it added.
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