Among the major economies, India witnessed the steepest decline in GDP growth in the April-June quarter following the outbreak of the coronavirus pandemic.
“The biggest contraction has resulted from the strict lockdown that India applied in the April-June quarter. India applied the most stringent lockdown, as reflected in the Government Response Strictness Index developed by the University of Oxford,” the ministry said. in your August Monthly Financial Review. .
The US economy contracted 9.1 percent, while the United Kingdom and France contracted 21.7 percent and 18.9 percent, respectively. Spain, Italy and Germany saw their economies contract 22.1 percent, 17.7 percent and 11.3 percent, respectively, in the June quarter, according to the report.
The euro area registered a 15 percent contraction, while the Japanese economy contracted 9.9 percent. Relative to these advanced nations, India’s 23.9 percent GDP contraction is slightly higher, according to the report.
On the positive side, the report said that the strict lockdown has allowed India to restrict the pandemic-induced death rate to be one of the lowest in the world. India’s case fatality rate was 1.78% as of Aug 31, compared to 3.04% in the US, 12.35% in the UK, 10.09% in France , 1.89% in Japan and 13.18% in Italy.
More about Covid-19
Furthermore, the report said that the country was witnessing a V-shaped pattern of recovery, as seen in several high-frequency indicators.
The indicators are car sales, tractor sales, fertilizer sales, rail freight traffic, steel consumption and production, cement production, energy consumption, e-way invoices, GST revenue collection, daily highway tolls collection, retail financial transactions, manufacturing PMI, core industries performance, capital inflows and exports, it added.
India’s manufacturing purchasing managers index (PMI) at 52.2 moved into the expansion zone in August for the first time since the lockdown, presenting much-needed recovery prospects for the manufacturing sector, it added.
Since May, agriculture has persistently been the brightest point in growth revival, according to the report, adding that industrial production is showing definite signs of recovery with year-on-year growth in eight major industries showing a smaller contraction in July than in June.
Thanks to strong FDI and FPI inflows and savings from tepid imports, foreign exchange reserves, as of August 21, have risen to an all-time high of USD 537.5 billion. These are capable of financing more than 13 months of imports, should the need arise for an increase in real sector activity, according to the report.
“The internal space is full of high systemic liquidity. A liquidity-filled system is a system ready to absorb an increase in real sector activity that is reflected in the yields of the benchmark 10-year bonds that decreased from 6.55 % at the end of April to 6.12 percent at the end of August, and the reduction of the spread in the yields of the 3-year AAA-rated corporate bonds and equivalent government securities from 246 basis points at the end of April to 55 basis points at the end of August, “he said.
According to the report, the world after COVID-19 will be different with structural changes in production, consumption and work patterns.
As India emerges from this crisis, it will be critical to reorient the country’s policy matrix towards calibrated rebuilding of the economy and building resilience for an uncertain future, he noted.
The report said that some areas that may require specific attention include agricultural supply chains, factor markets, infrastructure, ICT, startups, Financial inclusion, training and health care, and progress in these areas will sustainably drive economic growth in the years to come.
According to the report, deep and far-reaching structural reforms in the land, legal, labor and capital markets to reverse the manufacturing slowdown and stimulate risk appetite are relevant in this regard.
This justifies accelerating existing government initiatives in the factor market. The government has also provided a needed boost to targeted mega infrastructure projects as part of the National Infrastructure Pipeline to revive the manufacturing sector, he said.
Faced with the unprecedented job losses induced by the pandemic, the employer-employee relationship also requires structural changes, according to the report, adding that moving away from fixed job roles and creating role flexibility in the workforce will allow companies to cope better the post-pandemic. challenges.
Training, upgrading and updating the skills of the workforce are preeminent to enable it to be better prepared and adapt to the changing business environment, he said.
The report also noted that to strengthen India’s position in emerging global value chains amid changing trade dynamics, there is an urgent need to realign policy incentives in favor of labor-intensive export sectors.
Furthermore, the report said that India needs to consolidate its strengths in the area of generic drug and pharmaceutical exports and regain its market share in active pharmaceutical ingredients.
India may emerge as one of the pioneers in supporting easy, affordable and equitable access to the Covid-19 vaccine when it becomes available for administration, he added.
.
