India’s economy recovers better than expected but it is still this far from comeback

By: |
December 22, 2020 12:14 PM

The economy is on a comeback path as select parameters have seen a gradual but sustained improvement, but, it is still far from a comeback.

economic growth, economic recovery, comeback meter, care ratings, production, investment, consumptionCECM stood at 0.58 in August, 1.1 in September, 1.79 in October, and 2.62 in November.

India’s economy is recovering at a better-than-expected pace; however, there is a long wait before it makes the comeback. On the basis of three broad aspects of the economy – production, consumption, and investment, it is found out that the economy is on a comeback path as select parameters have seen a gradual but sustained improvement, but, it is still far from a comeback, according to Care Ratings’ Economic Comeback Meter. While an index of -2 to 0 shows deterioration; 0 to 5 shows ‘on comeback path’; 5 to 8 represents comeback; and 8 to 10 indicates growth path; the country’s economic indicators fell in the ‘on comeback path category in the four months to November 2020. 

CECM stood at 0.58 in August, 1.1 in September, 1.79 in October, and 2.62 in November. In the comeback tracker, production is represented by power generation, e-way bills, and non-oil-gold imports. On the other hand, consumption is measured by the sales of passenger cars and 2-wheelers, petrol consumption, and GST collections. Further, the investment is gauged on the growth in bank credit, and debt issuance in the market. 

The significance of CECM is to come to a single conclusion of economic growth as the interpretation of major indicators has been a puzzle. “Do we compare month-on-month growth rates or year? Also, do we compare year-on-year growth rates with the previous year or the previous month? Judgments vary depending on the assessment of month-on-month growth, year-on-year improvement, comparison of year-on-year growth rates with the rate of increase in the previous year or month,” Care Ratings said. 

Meanwhile, India’s economy had plunged 23.9 per cent in the first quarter, which quickly recovered to a contraction of 7.5 per cent in Q2. As the unlock process started, it was but obvious that month-on-month numbers would get better. Also, the case of pent up demand or preparation for the same would tend to create spikes in production numbers. 

Do you know What is Positive GDP growth seen in Q3, need to fight inflation: RB, Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Retail inflation for farm, rural workers eases in December on lower food prices
2Weak reform implementation, financial sector woes could lower India’s medium-term growth: Fitch
3States fiscal deficit seen spiking to historic high of 4.7%: Report