The central bank’s monthly bulletin for December said that more evidence has emerged since the last bulletin showing that the Indian economy is emerging from the Covid-induced slowdown.
“Since the assessment presented in last month’s article, more evidence has been provided to show that the Indian economy is emerging from the deep chasm of Covid-19 and is being refined at a rate that exceeds most predictions,” he said .
He noted that economic conditions continued to improve until November 2020 thanks to the rebound in agricultural and manufacturing activity.
In the June-September quarter, India’s GDP on a year-on-year basis contracted (-) 7.5 percent, declining from (-) 23.9 percent in the previous quarter.
At his last monetary policy meeting, the RBI revised up the projection of real GDP growth for fiscal year 21 to (-) 7.5 percent due to the faster recovery after the narrowing of the GDP contraction for July-September, along with the hopes of the Covid-19 vaccines.
It was an upward revision from the previous estimate of (-) 9.5 percent. Post the last meeting of the MPC, RBI governor Shaktikanta das had said that growth will enter a positive zone in the third quarter of the current fiscal year with the projection that GDP can grow at 0.1 percent and that growth will improve further in the fourth quarter to 0.7 percent. hundred.
In its December bulletin, the RBI also said that the financial conditions embedded in interest rates are perhaps the easiest in decades. Although headwinds are blowing, strong efforts by all stakeholders could put India on a faster growth trajectory, he added.
The bulletin said that states in all regions experienced a sharp drop in economic activity in April following the announcement of the national shutdown. Subsequently, the Coincident Index for all regions showed a recovery, albeit with intermittent downward movements.
A Coincidence Index (CI) with high frequency daily variables helps to capture the dynamics of economic activity at the state level in the country. CI is built with four indicators that represent a combination of supply and demand dynamics and is based on the availability of data with daily frequency at the state level: total vehicle registrations, electricity consumption, air quality index, mobility data of Google and Apple.
According to the CIs, the northern region experienced the steepest recovery in June, followed by positive momentum in July, while the western states of Gujarat and Maharashtra it recorded the slowest recovery, which lasted until the end of July and the first week of August.
In particular, state CIs across all regions are said to have posted a strong rebound in October. Although there was some moderation in the first half of November, momentum remained positive, reviving in the second half in most states.
The bulletin noted that CI has a positive and statistically significant relationship with the growth of industrial production.
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