With India unlocking, the worst seems to be over as high-frequency indicators show an improvement from the unprecedented trough the economy had hit in April 2020.
After Prime Minister Narendra Modi announced a nationwide lockdown to arrest the spread of coronavirus, India’s economy trembled in the month of April. While the businesses and industries came to a standstill, the economy struggled for revenue sources. However, the worst may now be over for India and the road ahead will take the economy back on the track. “With India unlocking, the worst seems to be over as high-frequency indicators show an improvement from the unprecedented trough the economy had hit in April 2020,” said the monthly macroeconomic report by the Department of Economic Affairs.
Indicators such as Index of Industrial Production (IIP), Purchasing Managers Index (PMI), power generation, production of steel and cement, railway freight, traffic at major ports, air cargo and passenger traffic, e-way bill generation capturing the inter-state movement of goods, consumption of petroleum products, and motor vehicle registration, have shown improvements, the report added. However, risks on account of rising COVID-19 cases and intermittent state lockdowns remain, the report further said. The future economic recovery of India is believed to be crucially linked to how the COVID-19 infection curve evolves across the states.
As businesses still have a long time to recover, the baton of economic recovery is in the hands of the agriculture sector, which contributes about 15 per cent of total gross value added. With the forecast of a normal monsoon at 102 per cent of the long-period average (LPA), the centre said that the agriculture is set to cushion the shock of COVID pandemic on the Indian economy in 2020-21.
The report underlined that the agricultural outlook improving and the recent landmark reforms announced in the sector are well-timed. The Modi government recently deregulised and liberalised the agricultural sector in India. “The reforms were extremely important given that agriculture, despite being the country’s largest private-sector enterprise in terms of employing more than half the workforce, is contributing only 15 per cent to India’s GVA,” the report said.
These reforms will go a long way in building efficient value chains, providing remunerative prices to farmers, and enabling the creation of a dynamic and vibrant agricultural sector in India, it added. The government’s recent reforms gave farmers the freedom to decide when, where, to whom and at what price to sell.