Signs of the wheels of the economy beginning to turn are evident from the fact that unemployment rates have tapered down from their peaks in May
A macroeconomic recovery in India will be subject to the end of lengthy and complete lockdowns even as some signs of improvement are already visible, Housing Development Finance Corporation (HDFC) chairman Deepak Parekh said at the company 43rd annual general meeting (AGM) on Thursday.
“My view is that one should not be too perturbed with forecasts of negative GDP (gross domestic product) growth rates. Most believe that India’s GDP growth which was slowing down in the pre-Covid era will contract by about 5% this year. But recovery will happen assuming no further lengthy and complete lockdowns in future,” Parekh said. Incidentally, Parekh is also part of the 11-expert team tasked with making suggestions to the Maharashtra government’s cabinet sub-committee on economic recovery in the wake of Covid.
Parekh said that from the utter despair that the world was in towards the end of March and April it has moved to a great deal of stability in the financial markets. Global fiscal support towards the pandemic now stands at $12 trillion and monetary policy across the globe has eased through lower interest rates, liquidity injections and massive asset purchases. Even in India, various fiscal and policy measures have ensured that there is adequate liquidity in the system. Interest rates are the lowest in the last 10 years.
“Today, the bright spot for India is the rural economy. A good monsoon, strong agricultural growth and government support through rural employment guarantee schemes is enabling rural consumption to lead India’s overall recovery,” Parekh said. Certain sectors are limping back to normalcy, but the strong probability of cycling in and out of lockdowns does remain, he added.
Signs of the wheels of the economy beginning to turn are evident from the fact that unemployment rates have tapered down from their peaks in May, e-toll collections are higher, as are e-way bills, digital transactions and GST (Goods and Services Tax) collections, which are back to the Rs 90,000-crore levels. Demand for two-wheelers and tractors has risen, even though passenger and commercial vehicle demand remains subdued.
The inherent demand for home loans continues to remain strong and the combination of low interest rates, fiscal incentives and steady to some softening of real estate prices bodes well for new homebuyers. “I do hope some of the state governments will offer some sweeteners like SAY, a temporary stamp duty waiver to encourage more homebuyers,” Parekh said.
The commercial real estate sector has been impacted largely due to massive migration of labour, which is making resumption of projects a challenge. The sector needs support and policies which will encourage labourers to come back to the construction sites with adequate precautions and protection. Parekh brushed aside concerns that demand for commercial real estate will diminish as more people work from home. “Many large companies have in fact acquired or leased commercial properties during this period – particularly in Bengaluru and Hyderabad. There is demand for real estate from newer sectors like warehousing, e-commerce companies and from cloud and data centre parks as they seek to increase their data storage capacities as well,” Parekh added.