New Delhi: The worst is over for the Indian economy and it is on path of a V-shaped economic recovery, said the finance ministry in its monthly economic outlook for August released Friday.
The report comes days after data from the National Statistical Office showed that the Indian economy contracted by a record 23.9 per cent in the April-June quarter as the pandemic and the lockdown brought all economic activity to a complete halt.
“With India unlocking, the worst seems to be behind us as high-frequency indicators show an improvement June onwards, from the unprecedented trough the economy had hit in the first quarter. Readings of economic data suggest growing convergence with previous year’s activity levels on several indicators,” the report said.
“Broad-based resurgent growth in several high frequency indicators such as PMI Manufacturing, eight core industries, e-way bills, kharif sowing, power consumption, railway freight, cargo traffic and passenger vehicle sales augur well for prospects of growth recovery,” it added.
It pointed out that rural demand is strengthening and sectors like construction and manufacturing are seeing a revival.
Construction, manufacturing, and hotels and transport were among the worst hit sectors, which contracted by 50 per cent, 39 per cent and 47 per cent, respectively in the April-June period.
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‘Covid vaccine to signal the end of uncertainty’
The report added that the macro-economic indicators elucidated above established that India is on the path to a V-shaped recovery but added that uncertainty persists on account of the pandemic.
“Unlike previous crises that originated from economic factors, the uncertainty in the current crisis stems from health factors originating from the pandemic. As a result, the uncertainty on discretionary items is likely to influence recovery. The arrival of the Covid vaccine would signal the end of this uncertainty and bring back discretionary consumption to pre-Covid levels,” the report said.
The shock to private consumption was also flagged by the Reserve Bank of India in its annual report last month. It had pointed out how spending is mainly on essential non-discretionary items.
The report stressed the need for a calibrated reconstruction of the economy and building resilience for an uncertain future adding that progress in areas like skilling, healthcare and agrarian supply chains, and infrastructure will sustainably boost economic growth in years to come.
Growth projections
Meanwhile, in a presentation to the 15th Finance Commission Friday, Chief Economic Advisor Krishnamurthy Subramanian cited 16 high-frequency indicators to say that the economy is seeing a significant rebound.
In a virtual press conference, N.K. Singh, the commission’s chairman, said that Subramanian presented growth projections for the current fiscal but these were higher than the projections made by other economists, who are part of the economic advisory council that met Friday.
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