Big relief for Indian economy: Five signs that show 2020 will be the year of rebound

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Updated: February 04, 2020 2:01 PM

The government said that inflation has been well contained and the GDP growth is expected to rebound from the first quarter of 2020-21.

Finance Ministe, Nirmala Sitharaman, FM Sitharaman, Finance Minister, indian economy, green shoots of revival, economic revival Nominal GDP is expected to grow at a rate of 10% and attain the level of Rs 224.89 lakh crore. (Bloomberg image)

Even as the ongoing slowdown has hit the economy across all quarters and the scar may take some time to fade away, the Modi government believes that the fundamentals of the economy are strong and that has ensured macroeconomic stability. The government also said that inflation has been well contained and the GDP growth is expected to rebound from the first quarter of 2020-21. “The GDP growth is expected to pick momentum from 2020-21. In 2020-21, the nominal GDP is expected to grow at a rate of 10 per cent and attain the level of Rs 224.89 lakh crore,” said the government in the Union Budget 2020.

Here are five signs that indicate the green shoots of economic recovery:

Manufacturing PMI:  In the third month of expansion, the manufacturing PMI increased to 55.30 points which is near an 8-year high level on the back of the increased new business, output, exports, input buying, and employment. The IHS report yesterday showed that the companies have noted the strongest upturn in new business intakes for over five years, which they attributed to better underlying demand and greater client requirements. The manufacturing sector is important for growth revival as it generates employment apart from the profits.  

Services PMI: The largest portion of the Indian economy – service sector – has also started to show the signs of revival. PMI rose to a five-month high of 53.3 in December 2019, easily beating market expectations of 51.4. Output growth accelerated to the second-strongest rate in over a year and new business rose the most since October 2016. Meanwhile, employment increased for the 28th month in a row.

Non-financial indicators: 11 of the 16 non-financial indicators such as the output of passenger vehicles, commercial vehicles, motorcycles, Coal India Limited, refinery output, etc have improved on-year in Q3 FY2020, compared to the previous quarter. Credit rating agency ICRA had said in its report that they anticipate a pickup in the real GVA and GDP growth in the third quarter of the current fiscal. 

Watch: What is GDP?

Agriculture growth: The first advance estimates of 2019-20 of the area and production of various horticulture crops released earlier this month expect the vegetable production to rise, especially among major food commodities like onion and potato. The onion production is expected to increase by 7.17 per cent on-year, while potato and tomato productions are expected to increase by 3.49 per cent and 1.68 per cent on-year respectively, according to the Department of Agriculture, Cooperation and Farmers Welfare.

Higher FDI: Even amid political instability and economic slowdown, FDI in the first half of the current financial year surged 17 per cent on-year to Rs 1.8 lakh crore from Rs 1.5 lakh crore, according to DPIIT. The FDI inflow in the second half of the fiscal year is further expected to rise. Rating agency Credit Ratings said there are expectations of further inflows in the FDI investment as India continues to remain one of the favoured destinations for the investment by foreigners. It added that in the second half of FY20, FDI equity inflows are estimated to the tune of around USD 25 billion.

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