The economy has witnessed a “V-shaped recovery” since the June quarter debacle and is now riding against the Covid wave on the back of an effective management of the pandemic, the finance ministry claimed on Tuesday, exuding confidence in the strength and durability of the rebound.
After a record slide of 23.9% in the June quarter, the year-on-year contraction in real GDP narrowed to 7.5% in the second quarter of this fiscal.
The economy has witnessed a “V-shaped recovery” since the June quarter debacle and is now riding against the Covid wave on the back of an effective management of the pandemic, the finance ministry claimed on Tuesday, exuding confidence in the strength and durability of the rebound. “The effective management of the Covid-19 spread despite the festive season and the onset of winter season, combined with sustained improvement in high-frequency indicators and V-shaped recovery along with easing of lockdown restrictions, distinguish Indian economy as one riding against the Covid-wave,” the department of economic affairs said in its report on the economy for December.
Non-food credit growth picked up strongly to touch 9.4% as of December 18, compared with 5.9% a month before, the report said. The growth is attributable to a “liquidity booster” and enhanced disbursement under the `3 lakh crore emergency credit line guarantee scheme. After a record slide of 23.9% in the June quarter, the year-on-year contraction in real GDP narrowed to 7.5% in the second quarter of this fiscal. This represented a 23% quarter-on-quarter surge in GDP growth, the finance ministry had recently said, terming it a “V-shaped recovery”.
The latest report said agriculture remains the bright spot of the Indian economy, with healthy y-o-y growth of 2.9% in rabi sowing, accelerating tractor sales, and reservoirs’ live storage at 122% of decadal average. Combined with a rise in minimum support prices accompanied by “record procurement”, and accelerated wage employment generation through MGNREGS, the brightening rabi prospects bode well for the rural sector.
“This rise in rural incomes is mirrored in the healthy, though moderated, sales in passenger vehicles, two- and three-wheelers and tractor, and a rebound in vehicle registrations for the first time after March 2020,” the report said. Globally, the approval of Covid-19 vaccine and initiation of inocculation drives in various countries lend fresh optimism on both health and economic fronts despite a continuing surge in global cases and the potential challenge of a mutant strain.
A sustained spurt in commercial and industrial activity was further corroborated by continued growth in manufacturing PMI, power demand, persistent improvement in E-way bills generated and highway toll collection rising above pre-Covid levels. Monthly GST collections attained their record levels of Rs 1.15 lakh crore in December. Meanwhile, inflows of foreign direct investments in the April-October period stood at a record $46.8 billion, up 11.3% from a year before. India’s market capitalisation hit $2.5 trillion on December 31 last year, pushing it to the eighth position globally. India’s foreign exchange reserves hit a new high of $580.8 billion as of December 25, which would cover over 16 months of imports.
Similarly, the liquidity situation remains comfortable as accumulation of dollars along with growth of currency in circulation has improved liquidity in the banking system despite the average daily net absorptions by RBI having risen from November to December. The spread between corporate bond yields and the benchmark G-secs yields has been narrowing in recent months, signalling improved risk perception of corporate bonds.
The report highlighted that India has succeeded in bending the Covid curve till now, with reducing weekly or daily infections, rising recovery rate (now at around 95%) and one of the world’s lowest case fatality rates. The active caseload has dropped below 2.5 lakh, placing India at the 10th position (in number of active cases). This is coupled by sustained numbers of tests-per-million, with cumulative test positivity rate below the World Health Organization’s norm of 8%, it said.