Indian economy experiences V-shaped recovery: FinMin report

The Indian economy is experiencing a V-shaped recovery, as the Gross Domestic Product (GDP) has registered a quarter-on-quarter growth of 23% in the July-September quarter of this fiscal year, according to the latest Monthly Economic Review of the Ministry of Finance . .

The drop in GDP slowed to 7.5 percent in the second quarter of this financial year, up from 23.9 percent in the April-June quarter. “The 7.5% year-on-year GDP contraction in the second quarter of 2020-21 underlies a 23% quarter-on-quarter increase in GDP growth. “This V-shaped recovery, evident in the intermediate stage of 2020-21, reflects the resilience and strength of the Indian economy. The fundamentals of the economy remain strong as the gradual easing of lockdowns, coupled with the shrewd support of the Atmanirbhar Bharat mission, has put the economy firmly on the road to recovery, ”said the November Monthly Economic Review. .

Growth engines have garnered the most support from agriculture, followed by construction and manufacturing, he said, adding that the touch-sensitive services sector has also contributed, albeit primarily through logistics and communications.

The recent holiday season contributed to an increase in new positive COVID-19 cases in India, although the numbers have started to decline again, a trend seen in many other countries, he said.

Consequently, he said, globally, the months of October and November 2020 have been one of economic uncertainty with the global composite PMI and goods trade activity showing a tepid rise, while energy and metals prices across the board. the world have moved in different directions, which adds even more to the uncertainty.

Overall, he said, inflation has eased in advanced economies while rising further in emerging market economies, reflecting a relatively greater impact from supply-side disruptions in the world’s most economically challenged countries.

“However, the high optimism among investors continues unabated, as seen in equity markets around the world. With the US dollar further weakening in November, growth prospects in the rest of the world have strengthened, “he said.

Sharing perspectives on the third quarter, the report said there is cautious optimism that global economic uncertainty is not reflected in India despite moderation in some high-frequency indicators in late November.

The overall increase in Rabi coverage with adequately filled irrigation reservoirs bodes well for agricultural production growth in 2020-21, he said.

In addition, the sustained demand for labor derived from the increase in Rabi planting has also contributed to the growth of rural wages, also supported by the increase in wages and the generation of employment within the framework of the National Rural Employment Guarantee Plan by Mahatma Gandhi (MGNREGS).

The additional allocation of Rs 10 billion in the latest package for Pradhan Mantri Garib Kalyan Rozgar Yojana would give new impetus to job creation in the rural sector and complement rural income.

Increasing minimum support prices for Kharif and Rabi crops in 2020-21, and progress in purchasing rice, have already supplemented rural incomes in the country, he said.

Speaking of downside risk, according to the report, the spread of a second wave of COVID-19 is challenging. However, there is cautious optimism that the sharp declines in the April-June 2020 quarter may not resurface with significant progress in vaccines and contact-intensive sectors increasingly adjusting to virtual normality.

The need of the hour is to follow appropriate COVID behavior and serious observance of established standard operating guidelines until a vaccine is approved and a large portion is inoculated, he said.