India’s economic growth in the December quarter is “a reflection of a further strengthening of the V-shaped recovery that began in the second quarter of 2020-21,” the Finance Ministry said on Friday. After contracting for two consecutive quarters, India’s gross domestic product (GDP) posted marginal growth of 0.4% year-on-year in the December quarter. The recovery is due to astute handling of the blockade and a calibrated fiscal stimulus, the ministry added.
“The strong V-shaped recovery has been driven by rebounds in both Private Final Consumption Spending (PFCE) and Gross Fixed Capital Formation (GFCF), as a combination of astute handling of the lockdown and calibrated fiscal stimulus it has allowed solid economic fundamentals to kick in and rapid resumption of high levels of activity in the economy, “the statement read.
“The initial political choice of” lives over livelihoods “followed by” lives and livelihoods “is now yielding positive results that converge with the government’s forecast of an imminent V-shaped recovery when it entered the war with the pandemic on health and economic fronts, “he added.
While the GFCF has improved from a 46.4% contraction in the first quarter to a positive growth of 2.6% in the third quarter, the PFCE has recovered from a 26.2% contraction in the first quarter to a much smaller contraction of 2.4% in the third quarter.
The revival of investment demand triggered by the Center’s capital spending, the Finance Ministry said. In addition to the general rebound in the economy, the GFCF’s resurgence in the third quarter was also triggered by capital spending in the central government, which increased year-on-year by 129% in October, 249% in November and 62 % in December 2020. associated with Capex are at least 3-4 times higher than the Government Final Consumption Expenditure (GFCE), since Capex induces a much higher consumption expenditure than normal income transfers “, mentioned the statement.
The manufacturing and construction sector experienced a significant recovery in the December quarter. Real gross value added (GVA) in the manufacturing sector improved from a 35.9% contraction in the first quarter to a positive growth of 1.6% in the third quarter. In the construction sector, the recovery was a contraction from 49.4% in 1Q to growth of 6.2% in 3Q. Real GVA in services has improved from a 21.4% contraction in the first quarter to a 1.0% contraction in the third quarter of 2020-21. Real GVA in agriculture grew from 3.3% in the first quarter to 3.9% in the third quarter.
A continued decline in the pandemic curve and an increase in the vaccination campaign, as recently announced, will support a further reactivation of contact-based services, the ministry added.
In the July-September quarter, India’s GDP contracted 7.5% year-on-year. The economy contracted 23.9% year-on-year in the April-June quarter as a result of the coronavirus outbreak and the national shutdown to prevent the virus. NSO revised GDP growth for the June and September quarters to -24.4% and 7.3%, respectively, versus previous estimates of -23.9% and -7.5%.
“India is not out of pandemic danger yet. Social distancing remains the most effective tool to combat the pandemic as activity levels continue to rise in the economy fueled by the country’s rapidly increasing inoculation campaign.” added. .
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