Year-long slowdown may not last longer; early indicators show green shoots of economic revival

By: |
Published: January 27, 2020 7:00:11 PM

With robust sowing of rabi crops and optimistic expectations of increased production of horticulture crops, the agri sector is also likely to regain its lost momentum.

non-financial sectors, indian economy, economic revival. slowdown, animal spirit, pmiThe improvement in the performance of core industries can be attributed to the growth in the coal and electricity sector.

The year-long slowdown in India may not continue for long as early indicators suggest a recovery in the growth. While after three consecutive months of contraction, the industrial output rebounded to the expansion side in the month of November 2019, the contraction in the core industries also substantially narrowed in the same month. The improvement in the performance of core industries can be attributed to the growth in the coal and electricity sector. Apart from the manufacturing and infra sectors, the non-financial sectors have also started to see the green shoots of recovery.

Recovery in non-financial indicators

11 of the 16 non-financial indicators such as the output of passenger vehicles, commercial vehicles, motorcycles, CIL and refinery output, hydroelectricity generation, non-oil merchandise exports, and rail freight traffic recorded an improved on-year performance in Q3 FY2020, compared to the previous quarter. “Benefitting from this, we anticipate a pickup in the real GVA and GDP growth in Q3 FY2020 from 4.3% and 4.5%, respectively, in Q2 FY2020,” said a credit rating agency ICRA in its latest report.

Also Read: Has India’s economic slowdown bottomed out? Early indicators suggest green shoots of economic revival

Optimistic agriculture growth
With robust sowing of rabi crops and optimistic expectations of increased production of horticulture crops, the agri sector is also likely to regain its lost momentum. According to the first advance estimates of 2019-20 of the area and production of various horticulture crops released today, the vegetable production is expected to rise in the current year. 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.

“The vegetable production is expected to increase by 2.64 per cent mainly due to increased production of onion, potato, and tomato,” the government said in its report. The report also expects the total horticulture production in the current fiscal to surge by 0.84 per cent, compared to FY19.

Strong animal spirit

The Purchasing Managers’ Indices have also shown a major improvement in the animal spirit. The manufacturing PMI rose to a seven-month high of 52.7 in December 2019 while the services PMI rose to a five-month high of 53.3 in the same month. The new export orders were up for the 26th month in a row and employment growth also rebounded to the strongest since February. On the services side, the output growth accelerated to the second-strongest rate in over a year and new business rose the most since October 2016, while employment increased for the 28th month in a row.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? 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.

Next Stories
1India’s mobile handset exports more than double; overtake last year’s exports in just 8 months
2How Goa state government plans to collect more tax from liquor buyers
3Sabka Vishwas tax scheme ends with flying colours; now do this to ensure people pay tax